IRS Rejected Your Offer - Now What?
There are legitimate reasons for IRS to reject your Offer in Compromise (OIC, also known as the Fresh Start Initiative) that may result in no appeal rights, some of which are:
- You failed to file a tax return. All returns must be filed for an OIC to be considered. You must continue to file on time while your OIC is under consideration. You are allowed to ask for an extension to file for the previous tax year to October15 from April 15 however we recommend that you file for the previous tax year as soon as possible.
- You filed a return after submitting your OIC with a balance due that you did not pay. Once your OIC is submitted, you cannot file tax returns with balances due that are not paid immediately. Once you enter the OIC process you are responsible for adjusting your withholding or estimated tax payments to ensure that you have sufficient money paid in to IRS to avoid filing a return with a balance due.
- You failed to pay estimated tax payments. Self employed individuals or those that do not have income tax withheld from their pay must make quarterly payments via form 1040-ES to make payments against what your estimated tax for the current tax year will be. For example: If you make your OIC in 2020, then you must have paid enough money during 2020 and by January 15, 2021 to make sure there is no balance due by April 15, 2021. IRS will calculate what they believe you owe in estimated taxes. If they believe you are short, they will demand payment or reject the OIC without appeal rights.
- You did not provide substantiation of your assets and/or expenses when demanded by the OIC examiner.
Providing you have been compliant with all the rules that go into submitting an OIC to IRS to settle your debt, you should be notified that you have 30 days to appeal a decision from IRS to reject your OIC. That 30 days begins to run based on the date of the letter, not the day you receive it so it is important to act quickly once the rejection letter is received.
IRS makes mistakes, plenty of them. We have found examiners: miscalculate a taxpayers actual income and claiming that the taxpayer makes more money than they do; list balances in bank accounts as money you receive in income every month; state you have cars or property that you don’t own; reject legitimate living expenses that they were provided proof of your paying; just plain ignore valid information provided to them.
The results of these errors can be that your OIC is rejected and IRS claiming you have income to pay your debt in full to IRS or even that your OIC was made to delay collection actions by IRS. The rejection letter contains the examiner’s findings and must be meticulously gone over to find these errors to submit a timely appeal to IRS. Once your appeal is received, IRS must review the response and, in most cases, will move the OIC up the chain to an appeals officer who has more authority to review and, in many cases, accept the submitted OIC. In some cases, the OIC may need to be increased to gain acceptance if the taxpayer has had an increase in income or reduction in expenses since the OIC was submitted but will often result in a lower amount paid than the full debt owed to IRS.
Tax Law Center is very experienced in filing appeals for OIC rejections and has a solid track record in helping taxpayers resolve their debt with IRS. While no firm or individual can guarantee results when it comes to dealing with IRS, we average a reduction of tax debt with the OIC to seven cents on the dollar. Contact us today to help you take your life back from crushing tax burdens.