The IRS appeals office is always available to get a second chance to see if an Offer in Compromise can get accepted. We have had tremendous success with IRS appeals. But you know what is even better? Not having to go to appeals in the first place because you got your Offer accepted by the offer examining unit! In this article I will discuss the essential strategies to making sure that your Offer in Compromise can be accepted — without having to resort to an IRS offer in Compromise appeal.
So, how do we create successful offers that are accepted without an Appeal?
We complete a full financial analysis for every client which determines if an Offer in Compromise is an option. Before we submit an Offer in Compromise, we confirm that the taxpayer is eligible and will remain eligible for at least the next two years. Why the next two years? If your expenses are expected to change or decrease in the near future, the IRS will take this into consideration. The worst possible time for you to discover that you aren't eligible is when your offer is in the middle of consideration, or in an OIC Appeal.
We make sure our clients are current with tax filing and estimated tax payments. The IRS will only consider an offer if the taxpayer is in tax compliance. Missing an estimated tax payment during consideration will result in your offer being rejected without further consideration (a decision that you cannot appeal). In addition, once an offer is accepted, you have to remain compliant for five years straight. If you are not committed to long-term tax compliance, hoping for offer acceptance is most likely futile.
We also verify that the client has not had a dissipated asset in the past ten years. The IRS has record of all your income received and reported by others. This includes distributions from retirement accounts. Funds recently withdrawn or liquidated from an account to pay for something that was not a necessary living expense will disqualify you from an Offer in Compromise. The offer examiner will ask you to explain where the money went and why it was not given to them instead.
The form for the Offer in Compromise (Form 433-A OIC) is different from collection Form 433-A, 433-B or 433-F. There are extra deductions or incentives, recently released under the IRS’s Fresh Start Initiative that you are able to use in conjunction with the Offer in Compromise, but not with any other resolution. This has allowed many of our non-eligible clients to magically qualify to submit an offer. We are seeing some of the lowest offers being accepted as a result of the new Offer in Compromise rules.
Documentation! After we establish that the client is eligible, we ensure that their offer will have the best chance of acceptance by providing complete and up-to-date financial documentation. Our objective is to leave the examiner with no questions, requests for additional documentation or arguments. We already know what they will be looking for, so why not make every attempt to provide it to them the first time? The less reason they have to inquire further about your finances, the better.
As for the offer amount, do not use the Offer in Compromise calculator. Most people who don't understand how the IRS really works will overpay by offering way too. Or they may submit an offer that is too low, neglecting some of the other great collection alternatives.
We always include a letter that explains entries on the financial statement that may seem questionable and any special circumstances the client may have. At some point, the examiner may be in disagreement with an entry or circumstance, but we have the opportunity to respond to their disagreement. Ultimately, if an agreement cannot be reached, all hope is not lost!
Yes, you are able to appeal the final decision of an offer examiner. In some cases, the offer examiner may not have the discretion to consider some of the facts in your case. Or maybe you feel like you are getting nowhere and that your case isn’t receiving a fair review. You can request that your case be sent to Appeals, where a new person who has not seen your case before can review the areas of disagreement and make a final decision.
Our firm has seen a drastic increase in the number of offers accepted in the consideration stage and a reduction in the amount of time the examiner must spend reviewing each client’s offer. From experience, we have found that the best way to avoid your offer going to the Appeals stage is simply to evaluate the client’s eligibility for an offer and prepare the offer properly, the first time.