The IRS may deny most offers in compromise requests. Those who have had their applications turned down are not alone. But we know that getting over being rejected isn’t easy. Right now, your mind is probably thinking, “My compromise idea was rejected; now what?”
Even if the Offer in Compromise (OIC) rejection letter came after a lengthy wait, you still have choices for paying down your tax debt. If the IRS has notified you that they won’t accept your offer to settle your tax debt, this article will give you an in-depth look at the appeals process and explain what you may do next.
The Rejection
Your OIC examiner will likely send you a message through email. You should be able to utilize the letter’s explanation of the rejection’s basis to guide your future moves.
Offers might be declined if you fail to provide full or accurate information on required forms. You may fix the problem and resubmit an OIC if your offer is returned without being reviewed. But there’s a chance you’ll have to fork out some more cash for the application process.
Appeals and Their Steps
You may discuss the figures used by the OIC examiner, such as the amount of equity you have in a certain asset if you disagree with them. It is important to remember that you only have thirty days from the date of the rejection notice to submit a formal appeal.
Time is running out if you haven’t made any headway in your appeal, so submit your paperwork as soon as possible. Since IRS Appeals operates independently, it may have a unique perspective on your case.
Even if you and the OIC examiner have worked together on this case for a while, your Appeals officer may defer to the OIC’s decision. The disagreement must be reasonable, and you must provide sufficient evidence to support your claims.
Various Other Choices
If your Offer in Compromise is not accepted, you have choices for resolving your tax debt, including withdrawing your offer.
For most people, payment plans are a reasonable compromise for tax obligations. Some tax debts may be forgiven under a partial installment arrangement.
Assuming you owe taxes, you may be able to work out payment options that work within your financial constraints. It’s also important to consider alternative methods of lowering your tax bill, such as filing separately for an innocent spouse or negotiating a lower penalty.
If an Offer in Compromise was rejected and you’re unsure what to do next, a tax dealing company may help you weigh your options.
If your offer in compromise was rejected, Rush Tax Resolution (https://rushtaxresolution.com/offer-in-compromise/) would assist you in filing an appeal or finding another solution to your tax problem. To meet with one of our tax resolution services, please fill out the contact form on this page.
Most Common Reason for OIC Rejection?
Collectibility
The IRS often denies OICs because they consider the taxpayer’s current and prospective income levels insufficient to cover the amount provided. For instance, if the taxpayer is a dentist who is now jobless, he may be able to start making money again in the future. The IRS will look at the taxpayer’s present, past, and projected earning capabilities to decide whether a taxpayer qualifies for the OIC.
Additional Tax Debt
To show “good faith” after submitting an Offer in Compromise, the taxpayer must comply with the IRS. The IRS may conclude that the taxpayer will not comply with the offer if they keep piling on taxes (for example, failing to make their anticipated tax payments).
Missing Information
The lack of specifics is often disregarded as a valid objection to OIC. Sometimes, taxpayers either don’t know or can’t recall crucial information needed to file their taxes, such as their Social Security number, employer identification number, etc. It’s also common for taxpayers to utilize outdated versions of required paperwork.
Bankruptcy
If a taxpayer has a pending bankruptcy case, they cannot file for OIC.
Default in Payment
OICs are sometimes rejected after the fact. An accepted OIC means the taxpayer has five years from the date of recognition by the OIC to submit and pay any due taxes. If the taxpayer loses their creditworthiness, the OIC may be revoked, and the “forgiven” tax obligation will be re-assigned to the taxpayer.
A “Frivolous” OIC
Agents at the IRS are wary of OICs filed merely to prolong the payment process. Many taxpayers resort to OICs to stall the collection process and buy themselves more time to pay off their tax debts. A frivolous OIC is when the applicant tries to delay the collection of his tax bill by whatever means necessary (e.g., numerous incomplete application forms).
Taxpayer records detailing attempts to evade taxation may also provide evidence of this. The IRS will promptly decline the application if it determines the tax return is being filed only to postpone collection actions.
How to Avoid OIC Rejection
If you’re hoping to get your offer in compromise accepted, it’s important to avoid rejection by understanding the most common reasons offers are rejected. The top reason? An unrealistic offer amount.
Your offer amount must be:
+ Reasonable – based on your unique financial situation
+ Supported by documentation – W2 forms, bank statements, etc.
+ Able to be paid within the statutory timeframe – no more than 24 months
If your offer is rejected, you’ll receive a letter from the IRS explaining why. You can then either revise youroffer and resubmit it or request a hearing with the Office of Appeals.
What to Do If You Are Rejected for OIC
If you have been rejected for OIC, there are a few things you can do to improve your chances of being accepted in the future. First, make sure that you have all of the necessary documentation. This includes tax returns, bank statements, and pay stubs. If you do not have all of the required documents, it is unlikely that you will be approved for OIC.
Next, review your financial situation and determine if there are any changes you can make to improve your chances of being approved. This may include increasing your income, paying off debts, or reducing your expenses.
Finally, contact the IRS and explain your situation. They may be able to provide you with additional information or resources that can help you get approved for OIC in the future.
Rhydian Choi