Section 7122 provides that “the Secretary may compromise any civil or criminal case arising under the internal revenue laws . . . .” This simple language supplies a statutory hook for the Service’s “Offer in Compromise” (OIC) program, one of the most important collection alternatives available for taxpayers who dispute an assessed liability or who acknowledge their debt but cannot afford to pay in full. Through the OIC program, the Service aims to achieve collection at the earliest possible time and at the least cost to the Government while simultaneously creating for the taxpayer an expectation of a fresh start toward future tax compliance.
Unfortunately, public perception may not correspond with the Service’s goals. A casual Internet search reveals dozens of websites promising to settle tax debts for pennies on the dollar, and “offer mills” across the nation advertise a quick, cheap resolution and minimal contact with the Service—a “get-out-of-jail-free” card without further consequences. To date, the Service has done relatively little to counter the offer-mill hype or take back the narrative.
This Article argues that, with some careful adjustments, the OIC program could become a powerful compliance mechanism. The key is to treat the OIC process as an opportunity for robust taxpayer education. Drawing on the scholarly literature regarding compliance norms and on sociological research concerning poverty concentration, the Article proposes that an educationdriven OIC model could transform taxpayer-offerors into ambassadors who promote norms of tax compliance in low-income communities where traditional Service messaging has failed. The Article offers a five-part strategy, with a balance of “carrots and sticks,” to achieve this positive compliance outcome.