If you manage to secure an offer-in-compromise from the IRS enabling you to settle your outstanding liability for less than the full amount, you should be particularly careful not to default on the agreement. In addition to making all required payments on the offer, you're also agreeing to remain in compliance in the filing and payment of all required taxes for a period of five years, or until the offered amount is paid in full, whichever is longer. Failure to meet these two requirements will result in an automatic default and the IRS can:
* File suit to collect an amount equal to the original liability less any payments already received,
reinstate the entire unpaid balance of the offer,
* File a Notice of Federal Tax Lien on any tax liabilities without liens,
disregard the amount of the offer and apply all amounts already paid against the original amount of the tax liability, or
* File suit or levy to collect the original amount of the tax liability, without further notice of any kind.
Small Business Taxes And Management