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Feb 9, 2024 | Tax resolution | 0 comments

Rejected by the IRS

What happens if it is Rejected?

What happens if your IRS Offer-in-Compromise is rejected?

Do not be surprised. The IRS agents assigned to the Offer-in-Compromise sections are geared to deny offers.

If you do not have a lot of experience with the IRS Offer-in-Compromise program, this is quite routine.  The reason is the IRS really does not want to accept your Offer! The IRS Offer specialist will try and find any reason to deny it.

You should understand the term “Offer Specialist” is an oxymoron.  Some of the specialists are very good, while others seem to have no clue what they are doing.

  • They will not allow the current tax payments because the taxpayer has a bad history of paying their taxes, and that is exactly the opposite of what the IRM states in Section 5.15)
  • The Offer specialist is refusing to allow repayment of a loan where those loan proceeds went to the IRS itself (HINT! – they are required to allow this)
  • The Offer specialist averages the income over the last three years, increasing it for the Offer but does not increase the tax due on it as well.  When pointed out the specialist may state that the taxpayer “is not actually paying that tax amount.”  Seriously?
  • The IRS Offer specialist cannot do math.

Again, some IRS specialists are very good……some are…

So, what do you do when you are faced with the denial of an IRS Offer-in-Compromise that you believe should be accepted?   You have several options:

  1. Appeal.  In more than 75% of those cases, we need to request the Appeal to get to someone who knows what they are talking about.
  2. Agree to an Addendum.  If the IRS is calculating a higher number for the taxpayer’s Reasonable Collection Potential, and you agree that it is correct (or it is an amount the taxpayer is willing to pay to just end this process), then tell the Offer Specialist your client will agree to the increase.  The Offer specialist can send an addendum for the taxpayer to sign, agreeing to the increased Offer and submitting any additional money that needs to be on file (for instance, the 20% upfront payment has now increased, so the additional amount will need to be submitted).  There is no guarantee the Offer will be accepted by the supervisor, but it generally is.

Before you give up hope on that Offer, carefully consider why it is being denied, and do not just rollover because the Offer Specialist disagrees.  Keep going! As Sir Winston Churchill’s said, “Never give up.”

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To resolve tax issues, it is necessary to be in “Tax Compliance.” The consequence for noncompliance means a taxpayer cannot have an Installment Agreement or do an Offer and Compromise Agreement. Also, the taxpayer opens his/herself to losing Tax Refunds, IRS “friendly” reminder notices, IRS Audits, penalties, interest, and Tax Levies.