When should I withdraw my IRS Offer in Compromise?
The IRS Offer in Compromise provides a great chance to settle a tax debt with the IRS permanently. Certainly the are drawbacks to the IRS Offer in Compromise program, but settling your tax debt for a fraction of what you owe is pretty dang sweet. Yet, there are times when you actually don’t want the IRS to fully consider your Offer in Compromise. You can accomplish this by withdrawing your Offer in Compromise. But why would you ever do this? In this article, I will discuss why sometimes withdrawing an Offer in Compromise is the best move…for now.
Withdrawal makes sense when your Offer in Compromise has no chance
Typically, when we withdraw an Offer in Compromise, it is after one of our clients submitted an Offer in Compromise on their own, with a CPA or a tax resolution firm. We this is, a lot of professionals treat the Offer in Compromise form is treat like any other tax return form. That is, plug in numbers to the IRS form, and hope for the best.
When does an Offer in Compromise have no chance?
An Offer in Compromise is an inspected by an Offer Examiner. “Examiner” is IRS-speak for “auditor.”
So think of it like this — an IRS Offer in Compromise is tax form in which you demand that the IRS audit your income and expenses! Which the IRS certainly does. Not only that, your income and expense must fall into narrow allowances to be considered valid and yet put you in a situation where your Reasonable Collection Potential is lower than the tax debt you owe. Complicated, isn’t it?
But we are not done — unlike an income tax audit, the IRS will audit all of your assets as well. The reason? To make sure you haven’t gotten rid of property to maker yourself appear poor to the IRS for tax negotiation purposes.
Structure, planning and explanations — these are critical to putting the best, complete Offer in Compromise that has a chance of being accepted.
And all to often, the Offers in Compromise we see fail to meet the high demands the IRS places for acceptance.
It is better to have an Offer withdrawn than rejected
If you don’t withdraw a faulty Offer in Compromise, the IRS will reject it. That rejection goes down on your account transcript. The problem develops as many taxpayers file faulty Offer in Compromise after faulty Offer in Compromise. When the IRS sees that, it assumes the taxpayers is just filing Offers in Compromise to delay collections and starts to discount anything the taxpayer says. A bit of ‘crying wolf,’ as it were.
IRS employees are severely overworked — especially in collections. It is incredibly easy to bog down their workload with frivolous Offers in Compromise. They will hold previous rejections against you when submitting an Offer in Compromise that actually has a chance.
So if you are unsure if you should withdraw an Offer in Compromise, because there is so much on the line, seeking a professional opinion from a tax firm that actually specializes in getting Offers in Compromises accepted would be a wise course of action.