Title 26, Internal Revenue CodeRelease 119-110
§7122 Compromises
Title 26 › Subtitle F — Procedure and Administration › CHAPTER 74 — CLOSING AGREEMENTS AND COMPROMISES › § 7122
Summary
The law lets the Secretary settle civil or criminal tax cases before they go to the Department of Justice, and lets the Attorney General settle them after they go to the Department of Justice. When the Secretary settles a case, an opinion from the Treasury General Counsel with reasons and a record of the tax assessed, the added interest or penalties, and the amount paid must be filed. That opinion is not required if the unpaid tax and related amounts are under $50,000, but the settlement must still face ongoing quality review. People who send an offer to settle their tax debt must include a partial payment. If the offer is a lump-sum (payments in five or fewer installments), 20% of the offer must be paid up front. If the offer is spread over time, the first planned payment must be paid when the offer is submitted. Missing a later installment while the offer is being reviewed can be treated as withdrawing the offer. The IRS must follow written guidelines when deciding whether to accept an offer. It must use published national and local living-expense charts when appropriate, and it cannot reject a low-income offer just because of its size. Offers that only dispute liability should not be rejected just because records are missing, and the taxpayer should not have to give a financial statement in that case. Low-income individuals whose adjusted gross income is at or below 250 percent of the poverty level do not have to pay the required partial payment or user fee. The Secretary can also waive payment rules by regulation. The IRS must give an independent review before rejecting an offer and allow an appeal to the Independent Office of Appeals. If the IRS does not reject an offer within 24 months after it is filed, the offer is treated as accepted, except for time when the tax is tied up in court. If part of an application is found to be frivolous under the law, that part can be treated as never submitted and need not be reviewed further.
Full Legal Text
Title 26, §7122
Internal Revenue Code, Source: USLM XML via OLRC
(a)Authorization
The Secretary may compromise any civil or criminal case arising under the internal revenue laws prior to reference to the Department of Justice for prosecution or defense; and the Attorney General or his delegate may compromise any such case after reference to the Department of Justice for prosecution or defense.
(b)Record
Whenever a compromise is made by the Secretary in any case, there shall be placed on file in the office of the Secretary the opinion of the General Counsel for the Department of the Treasury or his delegate, with his reasons therefor, with a statement of— (1)
(2)The amount of interest, additional amount, addition to the tax, or assessable penalty, imposed by law on the person against whom the tax is assessed, and
(3)The amount actually paid in accordance with the terms of the compromise.
Notwithstanding the foregoing provisions of this subsection, no such opinion shall be required with respect to the compromise of any civil case in which the unpaid amount of tax assessed (including any interest, additional amount, addition to the tax, or assessable penalty) is less than $50,000. However, such compromise shall be subject to continuing quality review by the Secretary.
(c)Rules for submission of offers-in-compromise
(1)Partial payment required with submission
(A)Lump-sum offers
(i)In general
The submission of any lump-sum offer-in-compromise shall be accompanied by the payment of 20 percent of the amount of such offer.
(ii)Lump-sum offer-in-compromise
For purposes of this section, the term “lump-sum offer-in-compromise” means any offer of payments made in 5 or fewer installments.
(B)Periodic payment offers
(i)In general
The submission of any periodic payment offer-in-compromise shall be accompanied by the payment of the amount of the first proposed installment.
(ii)Failure to make installment during pendency of offer
Any failure to make an installment (other than the first installment) due under such offer-in-compromise during the period such offer is being evaluated by the Secretary may be treated by the Secretary as a withdrawal of such offer-in-compromise.
(2)Rules of application
(A)Use of payment
The application of any payment made under this subsection to the assessed tax or other amounts imposed under this title with respect to such tax may be specified by the taxpayer.
(B)Application of user fee
In the case of any assessed tax or other amounts imposed under this title with respect to such tax which is the subject of an offer-in-compromise to which this subsection applies, such tax or other amounts shall be reduced by any user fee imposed under this title with respect to such offer-in-compromise.
(C)Waiver authority
The Secretary may issue regulations waiving any payment required under paragraph (1) in a manner consistent with the practices established in accordance with the requirements under subsection (d)(3).
(3)Exception for low-income taxpayers
Paragraph (1), and any user fee otherwise required in connection with the submission of an offer-in-compromise, shall not apply to any offer-in-compromise with respect to a taxpayer who is an individual with adjusted gross income, as determined for the most recent taxable year for which such information is available, which does not exceed 250 percent of the applicable poverty level (as determined by the Secretary).
(d)Standards for evaluation of offers
(1)In general
The Secretary shall prescribe guidelines for officers and employees of the Internal Revenue Service to determine whether an offer-in-compromise is adequate and should be accepted to resolve a dispute.
(2)Allowances for basic living expenses
(A)In general
In prescribing guidelines under paragraph (1), the Secretary shall develop and publish schedules of national and local allowances designed to provide that taxpayers entering into a compromise have an adequate means to provide for basic living expenses.
(B)Use of schedules
The guidelines shall provide that officers and employees of the Internal Revenue Service shall determine, on the basis of the facts and circumstances of each taxpayer, whether the use of the schedules published under subparagraph (A) is appropriate and shall not use the schedules to the extent such use would result in the taxpayer not having adequate means to provide for basic living expenses.
(3)Special rules relating to treatment of offers
The guidelines under paragraph (1) shall provide that—
(A)an officer or employee of the Internal Revenue Service shall not reject an offer-in-compromise from a low-income taxpayer solely on the basis of the amount of the offer,
(B)in the case of an offer-in-compromise which relates only to issues of liability of the taxpayer—
(i)such offer shall not be rejected solely because the Secretary is unable to locate the taxpayer’s return or return information for verification of such liability; and
(ii)the taxpayer shall not be required to provide a financial statement, and
(C)any offer-in-compromise which does not meet the requirements of subparagraph (A)(i) or (B)(i), as the case may be, of subsection (c)(1) may be returned to the taxpayer as unprocessable.
(e)Administrative review
The Secretary shall establish procedures—
(1)for an independent administrative review of any rejection of a proposed offer-in-compromise or installment agreement made by a taxpayer under this section or section 6159 before such rejection is communicated to the taxpayer; and
(2)which allow a taxpayer to appeal any rejection of such offer or agreement to the Internal Revenue Service Independent Office of Appeals.
(f)Deemed acceptance of offer not rejected within certain period
Any offer-in-compromise submitted under this section shall be deemed to be accepted by the Secretary if such offer is not rejected by the Secretary before the date which is 24 months after the date of the submission of such offer. For purposes of the preceding sentence, any period during which any tax liability which is the subject of such offer-in-compromise is in dispute in any judicial proceeding shall not be taken into account in determining the expiration of the 24-month period.
(g)Frivolous submissions, etc.
Notwithstanding any other provision of this section, if the Secretary determines that any portion of an application for an offer-in-compromise or installment agreement submitted under this section or section 6159 meets the requirement of clause (i) or (ii) of section 6702(b)(2)(A), then the Secretary may treat such portion as if it were never submitted and such portion shall not be subject to any further administrative or judicial review.
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
2019—Subsec. (c)(3). Pub. L. 116–25, § 1102(a), added par. (3). Subsec. (e)(2). Pub. L. 116–25, § 1001(b)(1)(F), substituted “Internal Revenue Service Independent Office of Appeals” for “Internal Revenue Service Office of Appeals”. 2014—Subsecs. (f), (g). Pub. L. 113–295 redesignated subsec. (f) relating to frivolous submissions as (g). 2006—Subsec. (c). Pub. L. 109–222, § 509(a), added subsec. (c). Former subsec. (c) redesignated (d). Subsec. (d). Pub. L. 109–222, § 509(a), redesignated subsec. (c) as (d). Former subsec. (d) redesignated (e). Subsec. (d)(3)(C). Pub. L. 109–222, § 509(b)(1), added subpar. (C). Subsec. (e). Pub. L. 109–222, § 509(a), redesignated subsec. (d) as (e). Subsec. (f). Pub. L. 109–432 added subsec. (f) relating to frivolous submissions. Pub. L. 109–222, § 509(b)(2), added subsec. (f) relating to deemed acceptance of offer not rejected within certain period. 1998—Subsec. (c). Pub. L. 105–206, § 3462(a), added subsec. (c). Subsec. (d). Pub. L. 105–206, § 3462(c)(1), added subsec. (d). 1996—Subsec. (b). Pub. L. 104–168 substituted “$50,000. However, such compromise shall be subject to continuing quality review by the Secretary.” for “$500.” 1976—Subsecs. (a), (b). Pub. L. 94–455 struck out “or his delegate” after “Secretary”.
Statutory Notes and Related Subsidiaries
Effective Date
of 2019 Amendment Pub. L. 116–25, title I, § 1102(b),
July 1, 2019, 133 Stat. 986, provided that: “The amendment made by this section [amending this section] shall apply to offers-in-compromise submitted after the date of the enactment of this Act [
July 1, 2019].”
Effective Date
of 2006 AmendmentAmendment by Pub. L. 109–432 applicable to submissions made and issues raised after the date on which the Secretary first prescribes a list under section 6702(c) of this title, see section 407(f) of Pub. L. 109–432, set out as a note under section 6320 of this title. Amendment by Pub. L. 109–222 applicable to offers-in-compromise submitted on and after the date which is 60 days after May 17, 2006, see section 509(d) of Pub. L. 109–222, set out as a note under section 6159 of this title.
Effective Date
of 1998 AmendmentAmendment by Pub. L. 105–206 applicable to proposed offers-in-compromise and installment agreements submitted after July 22, 1998, see section 3462(e)(1) of Pub. L. 105–206, set out as a note under section 6331 of this title.
Effective Date
of 1996 Amendment Pub. L. 104–168, title V, § 503(b),
July 30, 1996, 110 Stat. 1461, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [
July 30, 1996].” Preparation of Statement Relating to Offers-in-Compromise Pub. L. 105–206, title III, § 3462(d),
July 22, 1998, 112 Stat. 766, provided that: “The Secretary of the Treasury shall prepare a statement which sets forth in simple, nontechnical terms the rights of a taxpayer and the obligations of the Internal Revenue Service relating to offers-in-compromise. Such statement shall— “(1) advise taxpayers who have entered into a compromise of the advantages of promptly notifying the Internal Revenue Service of any change of address or marital status; “(2) provide notice to taxpayers that in the case of a compromise terminated due to the actions of one spouse or former spouse, the Internal Revenue Service will, upon application, reinstate such compromise with the spouse or former spouse who remains in compliance with such compromise; and “(3) provide notice to the taxpayer that the taxpayer may appeal the rejection of an offer-in-compromise to the Internal Revenue Service Office of Appeals [now Internal Revenue Service Independent Office of Appeals].”
Reference
Citations & Metadata
Citation
26 U.S.C. § 7122
Title 26, Internal Revenue Code
Last Updated
Sep 22, 2026
Release point: 119-110