The IRS has done quite a bit to promote the Offer in Compromise program during the economic downturn of the last few years, and the message is coming across loud and clear. That’s the good news. The bad news is the IRS can’t seem to handle the onslaught of new offers.
The Offer in Compromise (OIC) is a program whereby the IRS accepts an amount that is less than the tax liability to forever settle what is owed. The rationale behind the OIC program is this: if the taxpayer can prove that the amount offered is the absolute most he/she can pay and the IRS will most likely never be able to collect the full tax debt, it is better for the government to cut their losses and take it rather than expend any more resources trying to collect some unknown amount at some unknown time in the future.
According to a recent audit report by the Treasury Inspector General for Tax Administration (TIGTA), there are huge OIC backlogs at both the Memphis and the Brookhaven Offer Units, but Memphis is in worse shape than Brookhaven. The IRS is in the process of transferring cases between sites to even things out, but precious time is lost in the transfer process, so who knows if that will truly reduce delays.
Offers with the following characteristics can expect the longest delays:
- taxpayer is self-employed
- taxpayer earns over $100,000 per year
- taxpayer owes over $50,000 in back taxes
- taxpayer lives in a state handled by the Memphis OIC Unit (AK, AL, AZ, CA, CO, HI, ID, KY, LA, MS, MT, NV, NM, OR, TN, TX, UT, WA, WI, WY)