As you may have noticed in our discussion forums, there are often ethical or pol

Question

As you may have noticed in our discussion forums, there are often ethical or political issues when dealing with tax issues. For example, the Offer in Compromise (OIC). Does it seem right to let people off the hook for their taxes just because they claim they can't pay? And what about those OICs that are granted for "effective tax administration" reasons? Most of those are granted for "public policy" reasons.

For example, if a charity got itself into a tax hole, does it seem right for the public to "forgive" the taxes simply because the entity does good deeds?

Explanation / Answer

There are arguments against compromising tax debts. It seems unfair to forgive already accessed tax liabilities as the government has to incur administrative cost to provide such relief. It is inequitable to forgive the tax debts of some tax payers while making others to pay in full. It creates a moral hazard in the society as the tax payers will be used to engage in risky behaviors which may result in their inability to pay the tax

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