If you've submitted an Offer in Compromise, you know how much time and effort is put in; rejection can be devastating. Here are some reasons why your Offer in Compromise was rejected, and what you might be able to do to fix it.
1. Your Offer in Compromise was rejected because you aren't current
If the IRS knows you won't stay current with your offer, there's no reason for them to accept an offer. There's a myth that the IRS's "Fresh Start" program will make your debt magically disappear.
The truth is the IRS Fresh Start Offer in Compromise Program is merely a set of guidelines that may help you pay off tax debts for less than what is owed. But – the program doesn't mean you don't have to be in current compliance with your filing & payment requirements; quite the contrary.
2. You didn't substantiate
We have had clients contact us about their failed Offer in Compromise and what we can do to help them out — turns out some people don't realize how serious your offer is. An Offer in Compromise is a legal claim where every little shred of evidence counts towards the approval of your offer.
An Offer in Compromise is completely unlike a tax return that will likely never be scrutinized by a real human being. Tax returns are presumed to be accurate, and only where there is a numerical difference between, say a 1099 reported and a 1099 as claimed (or not claimed), will the IRS contact you.
But an Offer in Compromise…it's completely different. There will certainly be an Offer in Compromise Examiner who will not only audit your income, but also your assets.
3. You didn't rebut the IRS's claims
IRS examiners are only human, and humans make mistakes. An examiner can "accidentally" miscalculate or misrepresent your submission. You have every right to rebut the examiner and correct his/her mistake.
All too often taxpayers (or their representatives) just roll over and accept plain error and never point out obvious mistakes an Offer in Compromise Examiner made when determining your Reasonable Collection Potential.
4. You didn't appeal
One thing people commonly miss: you have the right to appeal! If at first you don't succeed, appeal. But get this — your appeal will only be as strong as your underlying offer. So if you aren't current, if you didn't substantiate, if you didn't bother rebutting the IRS's claims, you will have a harder time getting an Offer in Compromise accepted.
Tips on Filing an Offer in Compromise and avoiding a rejection
The Offer in Compromise program does work, and can work great! But there are quite a few factors at play (to say the least). For tips on how to file an Offer in Compromise, click here. If you need assistance filing an Offer in Compromise, or appealing a rejected Offer in Compromise, contact us. We can help.