- Instructor: Attorney Bob Schaller
- Lectures: 1
- Quizzes: 1
Criminal Restitution Issues.
Taxpayers may submit an Offer in Compromise application to resolve criminal penalties. The Secretary of the Treasury may compromise any criminal liability arising under the internal revenue laws prior to the reference to the Department of Justice for prosecution or defense. 26 U.S.C. § 7122(a). An agreement to compromise may relate to criminal liability for taxes, interest, or penalties. 26 C.F.R. § 301.7122-1(a)(2). Unless the terms of the accepted offer expressly provide otherwise, acceptance of an offer to compromise a civil liability does not remit a criminal liability, nor does acceptance of an offer to compromise a criminal liability remit a civil liability. 26 C.F.R. § 301.7122-1(a)(2); 26 C.F.R. § 601.203(c)(3).
Notwithstanding, a criminal liability will not be compromised unless it involves only the regulatory provisions of the Tax Code and related statutes. 26 C.F.R. § 601.203(a)(2). However, if the violations involving the regulatory provisions are deliberate and with intent to defraud, the criminal liabilities will not be compromised. 26 C.F.R. § 601.203(a)(2).
An offer may be accepted from a taxpayer who also has been ordered to pay criminal restitution. Although the IRS is authorized to pursue collection of a restitution-based assessment (RBA), an Offer in Compromise may only include a taxpayer’s civil tax liabilities, not any criminal restitution. The acceptance of an offer to compromise with a civil tax assessment does not impact the validity of the RBA and the taxpayer is still responsible for any outstanding balance of the RBA. Payments received based on the terms of the offer will be applied to the civil tax assessments, yet in some circumstances the RBA may stem from the same type of tax and tax periods, so offer payments may partly satisfy the RBA when duplicate civil and/or codefendant assessments exist. IRM § 5.8.9.3.2 (04-23-2018).
