The IRS Offer-in-Compromise specialist has review the Offer is now recommending it be rejected.
If you do not have a lot of experience with the IRS Offer-in-Compromise program, this is quite routine. The reason, sadly, is the IRS really does not want to accept your Offer, so the Offer spoecialist will try and find any reason to deny it.
The other thing you should understand is the term “Offer Specialist” is an oxymoron. Some of the specilaists are very good, while others seem to have no clue what they are doing. Having practiced in this arena for over 20 years, I feel comfortable saying I have seen everything. Stupid reasons actually given by Offer Specialists include, but are not limited to, the following:
- They wont allow the current tax payments because the taxpayer has a bad history of paying their taxes (first of all “duh, that’s why they are filing the Offer,” and that is exactly the opposite of what the IRM states in Section 5.15)
- The Offer specialist is refusing to allow repayment of a loan where those loan proceeds went to the IRS itself (hint hint – they are required to allow this)
- The Offer specialist averages the income over the last three years, increasing it for the Offer but does not increase the tax due on that as well. When this is pointed out they state that the taxpayer “is not actually paying that tax amount.” Seriously? “Yes,” we reply, “because they are not actually earning that amount…..”
- The IRS Offer specialist cannot do math
However, evey now and then the Offer specialist actually fiunds something legitimate. They are bound to get it right at least some times.
So what do you do when you are faced with the denial of an IRS Offer-in-Compromise that you believe should be accepted? You have sveeral options:
- Appeal. We get over 92% of opur Offers accepted (vs the 48% that is the national average). In more than 75% of those cases we need to request the Appeal to get to someone who knows what they are talking about.
- Agree to an Addendum. If the IRS is calculating a higher number for the taxpayer’s Reasonable Collection Potential, and you agree that it is correct (or it is an amount the taxpayer is willing to pay to just end this process), then tell the Offer Specialist your client will agree to the increase. The Offer specialist can send an addendum for the taxpayer to sign, agreeing to the increased Offer and submitting any additional money that needs to be on file (for instance, the 20% upfront payment has now increased, so the additional amount will need to be submitted). There is no guarantee the Offer will be accepted by the supervisor, but it generally is.
Before you give up hope on that Offer, carefully consider why it is being denied, and dont just rollover becauise the Offer Specialist disagrees. If you undertsnd the Offer process and formula, chances are your Offer is good. Keep going!