Offer in Compromise Fees

Sometimes taxpayers are not 100% clear about the role of the IRS.  Some IRS employees can be very convincing and will lead people to believe that they only want to help and provide some kind of service to the taxpaying public.  This is a nice concept (and one that is embraced by IRS mission statements as well), but it is not reality.  The reality is that the IRS exists to collect revenue, and only to collect revenue.  The more one delves into the “back office” of the IRS, the more obvious this becomes.  This fact is emphasized over and over (both explicitly and implicitly) in official IRS policies and procedures.

One example of this is seen in the Offer in Compromise (OIC) process, specifically with respect to OIC fees.  The IRS accepts offers from taxpayers who have very little to give in the first place, so it is interesting how the IRS places such a big emphasis on the accompanying OIC fees.  An OIC must include a non-refundable $150 processing fee and a 20% deposit (20% of the offer amount).  In fact, if either of these payments are missing then the offer is deemed “Not Processable,” and is returned to the taxpayer.  Yes, there is a fee waiver process for taxpayers who fall below the poverty line, but it rarely works as it should.

Also, IRS employees are given specific instructions on how to categorize offers that are received in Centralized Offers in Compromise sites based on whether or not the OIC packages include money.  IRM lists the different categories, and I don’t believe it is any coincidence that the offers with fees are at the top of the list.

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