The IRS Offer in Compromise provides a great chance to settle a tax debt with the IRS permanently. There can be drawbacks, but settling your tax debt for a fraction of what you owe is pretty dang sweet. There are times when you actually don't want the IRS to fully consider your Offer in Compromise, and you can accomplish this by withdrawing your offer. But why would you ever do this? In this article, I will discuss why sometimes an IRS Offer in Compromise withdrawal is the best move…for now.
Withdrawal makes sense when your Offer in Compromise has no chance
Typically, when we withdraw an Offer in Compromise, it is after one of our clients submitted an Offer in Compromise on their own, with a CPA, or with a tax resolution firm. A lot of professionals treat the Offer in Compromise form like any other tax return form; that is, they just plug numbers into the form and hope for the best.
When does an Offer in Compromise have no chance?
An Offer in Compromise is an inspected by an Offer Examiner. "Examiner" is IRS-speak for "auditor." Basically, an IRS Offer in Compromise is a tax form in which you demand that the IRS audit your income and expenses. Not only that, your income and expenses must fall into narrow allowances to be considered valid and yet put you in a situation where your Reasonable Collection Potential is lower than the tax debt you owe!
But we're not done — unlike an income tax audit, the IRS will audit all of your assets as well. The reason? To make sure you haven't gotten rid of property to make yourself appear poor to the IRS for tax negotiation purposes. Structure, planning, and explanations — these are critical to submitting the best Offer in Compromise that has a chance of being accepted.
It is better to do an IRS Offer in Compromise withdrawal than be rejected
If you don't withdraw a faulty Offer in Compromise, the IRS will reject it. That rejection goes down on your account transcript. The problem develops as many taxpayers file faulty Offer in Compromise after faulty Offer in Compromise. When the IRS sees that, they assume the taxpayers is just filing Offers in Compromise to delay collections and starts to discount anything the taxpayer says. A bit of 'crying wolf,' as it were.
IRS employees are severely overworked — especially in collections. It is incredibly easy to bog down their workload with frivolous Offers in Compromise. They will hold previous rejections against you when submitting an Offer in Compromise that actually has a chance.
So if you are unsure if you should do an IRS Offer in Compromise withdrawal, contact us for a free consultation.
