Critics say many people have to wait much too long for an IRS response to a compromise offer, and that the application process is needlessly burdensome. They also say the IRS rejects far too many offers.

Some of the individuals interested in the program relied on tax shelters that later blew up and are in the process of trying to seek a compromise with the IRS, says Robert E. McKenzie of the law firm Arnstein & Lehr in Chicago.

The agency recently came up with a new application form for the "offer in compromise" program, designed to make it easier for people to determine their eligibility and apply. The form was last revised in 2001.

The new application represents "part of our continuing effort to improve this program," said IRS Commissioner Mark W. Everson. But the move has done little to quiet the steady drumbeat of heavy criticism from senators - and even a high-ranking IRS official - over the IRS's handling of the program.

IRS officials emphasize that compromise offers may be considered "only after other payment options have been exhausted." If people can't pay their taxes in full, "there are other payment options, such as monthly installment agreements, that must be explored before an offer in compromise can be submitted."

Senate Finance Committee Chairman Charles Grassley, an Iowa Republican, and Sen. Max Baucus of Montana, the committee's ranking Democrat, raised tough questions about the program in a stern letter in September to Treasury Secretary John Snow. "Unfortunately, we are concerned with the Treasury's and the IRS's continued failure to efficiently and effectively administer" the program, Sens. Grassley and Baucus wrote. An IRS official said late Tuesday a reply has been delivered to the committee, but hasn't yet been made public.

Among other critics is Nina Olson, the IRS's National Taxpayer Advocate, who has expressed frustration and exasperation about the IRS's handling of the program. Earlier this year, a National Taxpayer Advocate report to Congress said the IRS's current processes "continue to prevent taxpayers from utilizing the program by imposing barriers to entry, unnecessarily returning offers, and unreasonably rejecting many of the offers that make it into the program."

Ms. Olson said Tuesday that she continues to have "serious concerns about the way" the program is being administered. The new forms are "a step in the right direction because they are clearer and will help educate taxpayers" about the IRS's criteria, "potentially reducing" the number of offers that will be returned unprocessed. "But for the most part, they do not address the fundamental problems with the program."

In addition to revising the form, the IRS also issued a "consumer alert," warning the public to beware of "unscrupulous promoters" preying on unsuspecting people in deep financial trouble.

These promoters "make money by inappropriately advising indebted taxpayers to file an application for an offer in compromise with the IRS, promising unrealistic results, even when the taxpayers do not meet the requirements of the program," the IRS said. "This bad advice costs taxpayers money and time."

The IRS didn't name any names but did say taxpayers may refer promoters using the program "inappropriately" to the IRS's Office of Professional Responsibility for civil sanctions. Send complaints to: Office of Professional Responsibility (SE:OPR), Internal Revenue Service, 1111 Constitution Ave. N.W., Washington, D.C. 20224. "Although there are some tax practitioners who promote dubious schemes, most practitioners give quality service to their clients," the IRS added.

-- Tom Herman