Once an Offer in Compromise application has been submitted to the IRS, all collection actions against a taxpayer must stop. This matter generally has to be negotiated with the Revenue Officer; however, the only stated grounds for continuing collection are made for delays and under conditions of jeopardy of the liability.
Collection after Offer in Compromise Submission
The IRS is also prohibited from levying a taxpayer’s property or rights to property while an Offer in Compromise is pending, for 30 days after a rejection of an Offer in Compromise, or while an appeal is under way for a rejection of an Offer in Compromise.
An Offer in Compromise is considered pending when it is accepted for processing by the IRS. The IRS will accept an Offer in Compromise as pending if it is without material error.
Delays & Jeopardy
The IRS will still have the ability to levy property of the taxpayer if it determines that Offer in Compromise was submitted solely to delay collection or the collection is in jeopardy.
Returning Offer in Compromise
The IRS can also return an Offer in Compromise to the taxpayer if they are not current on their filing of tax returns or making estimated tax payments. The IRS will notify the taxpayer of these deficiencies and allow them 30 days to become current with the IRS.