Judge Goeke raises that question in Kenneth Son & Josephine N. Son, Docket No. 25814-22L, filed 2/2/26. This is a routine IRS summary J motion from a CDP NOD, to which the Sons objected but didn’t respond.

But the record is incomplete, and therein lies the question: before IRS can blow off an OIC, how much must the taxpayer default?

“The OIC is not in the administrative record. However, respondent described it as requiring petitioners to make estimated tax payments, timely file their returns, and make estimated tax payments for the 5 years following the IRS’s acceptance of the OIC, which are standard terms of OICs (5-year compliance requirement). See Form 656, Offer in Compromise.” Order, at p. 1.

The Sons’ OIC covers six (count ’em, six) years. The IRM is explicit as to what steps must be taken to invalidate an OIC. See Order, at p. 3. “Termination of an OIC for noncompliance is authorized but not automatic.”  

Judge Goeke finds IRS skipped a few. One such is the basis for the headline first written hereinabove at the head hereof, as expensive lawyers would say. “As an exception to the potential default rules, the IRM provides that a failure to pay amounts owed that are less than a certain dollar amount (which is redacted in the IRM) (threshold amount) is not treated as a breach. IRM pt. 5.19.7.14.4.1 (July 9, 2020). Thus, it appears that the IRM in effect for the 5-year compliance period provided than a minor breach (i.e., nonpayment below the threshold amount) does not cause a potential default.” Order, at p. 3.

So here’s a checklist for the upcoming trial.

“The administrative record does not establish the following facts: (1) the terms of the OIC; (2) the IRS sent a potential default letter, (3) the IRS sent a formal default letter, (4) petitioners ‘habitually failed to make [ ] required estimated tax deposits’ before the IRS terminated their OIC, and (5) it was appropriate for the IRS to terminate the OIC for unpaid balances of less than $1,000 and $500, for 2020 and 2021, respectively.” Order, at p. 3.