Legal Definitions - closing agreement

A closing agreement is a written contract between a taxpayer and the Internal Revenue Service (IRS) to resolve a tax dispute. It is a legally binding agreement that settles the dispute and prevents further legal action.

For example, if a taxpayer is audited by the IRS and there is a disagreement about the amount of taxes owed, they may enter into a closing agreement to settle the dispute. The agreement will outline the terms of the settlement, such as the amount of taxes owed and any penalties or interest.