The Offer in Compromise is a tax settlement proposition by the IRS that has been designed to allow taxpayers unable to pay their tax dues in full to settle their debts by paying only a portion of their dues. This Offer is not “automatic” and taxpayers, both individual and business, have to file for the Offer by filing out and submitting Form 656.
There can be several outcomes when you submit Form 656. It can be rejected outright, which can be for reasons such as not using the up-to-date versions of Form 656 and Form 433-A or 433-B, if you have not adhered to all the filing procedures and payment norms listed in the Form 656, if you have not paid the application fee of $150, or if a bankruptcy case is pending against you. If the form is accepted, it goes for processing that can take anything from 6 months to a year. However, the IRS has reported that in recent times, the percentage of cases that have been processed within six months has been steadily increasing.
During the processing time, your Offer is considered as being pending. After the processing is complete, your Offer may be accepted, rejected, or returned.
The Appropriate Status
So, in a nutshell, an Offer in Compromise is considered to be pending during the time when it has been accepted for processing, as has been determined by an authorized employee of the IRS, and until the time the IRS accepts, rejects, or returns the Offer or acknowledges the withdrawal of the Offer in a written statement.
You, as a taxpayer, are entitled to certain benefits during the time your Offer is pending with the IRS. For instance, during this entire processing period, you are protected from any kind of IRS enforcement action because the statute of limitations for assessing and collecting tax dues is suspended when an Offer is pending or is being reviewed. This means that the IRS cannot levy your property when your Offer is pending. It is noteworthy in this context that the IRS also cannot levy your property till 30 days after your Offer has been rejected or while your appeal to reconsider the rejection decision is pending.
Knowing all about an Offer in Compromise when its status is pending saves you many a nail-biting moment and also ensures that you can protect your rights as a taxpayer from any infringement by the IRS.