Filing OIC? Take a Number.

Posted by Montgomery on with 0 Comment

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)

Offer in Compromise

Posted by Montgomery on with 0 Comment

The Offer in Compromise (OIC) is often considered the ultimate form of tax relief. If you are considering an OIC to address your outstanding IRS tax debt, there are a few things you should know.

First, not everyone with a tax debt should attempt an OIC. The OIC is a special program generally reserved for low-income taxpayers with few assets. The OIC filing fee is $150 and the IRS also requires that you pay 20% of your offer amount up front when the offer is filed. Unless you are confident that the offer is going to be accepted, you may be better off saving yourself these fees.

Second, not everybody who meets the criteria for the OIC should file an OIC. Basically, it just has to make good sense. For example, the offer amount must be low enough in comparison to the overall tax debt. Also, if the balances you owe are old and about to expire, you may be in a situation where it would make more sense to “wait out” the statute of limitations rather than make an offer to the IRS.

Third, a tax attorney can maximize your chances of filing a successful Offer in Compromise. An experienced tax attorney will help you determine if the OIC is right for you and if it makes sense to file. An experienced tax attorney has the skills needed to present your financial information in a manner that is most advantageous to you.

Offer in Compromise: The 24-month Rule

Posted by Wetenkamp on with 0 Comment

The IRS has 24 months from the date that anOffer in Compromise is received to make its decision.  If the IRS does not accept, reject, or return the offer within 24 months, then it is deemed accepted  (IRM 5.8.8.6).  According to IRS policy, “The timeliness of case actions in an offer investigation is important not only to ensure the efficiency of the process but also is a key component of taxpayer satisfaction”  (IRM 5.8.1.2).

But lets face it, the Offer in Compromise process can be lengthy and the IRS has never been very good with taxpayer satisfaction.  It routinely takes several months just for the IRS to mark the offer as received and assign it to an Offer Examiner.  And that’s only the beginning of the process.

I have never seen the 24-month mandatory acceptance provision come into play.  Certainly the responsible IRS employee(s) would be disciplined, if not fired, for letting the 24-month period expire.  My problem with the 24-month rule is that it does not have the intended effect.  In fact, it seems like it is quite the opposite.  An astute IRS representative with a caseload he can barely keep up with will probably delay as long as he can, even though the entire process could easily be completed in 30-60 days.