How long does it take for the IRS to accept an Offer in Compromise?
The IRS Offer in Compromise program is a great way to settle unmanageable tax debt. But before you file an Offer in Compromise (for doubt as to collectability), it is a good idea to manage your expectations and realize how long the process is going to take. This article will discuss a typical timeline and some of the usual hitches along the way.
First step: Get your Offer in Compromise deemed “processible.”
- you are not a debtor in an open bankruptcy proceeding;
- you have Submitted the $150 application fee, or Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment;
- you Submitted 20 percent payment with the lump sum offer, or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment; or you have Submitted the first installment payment on a short term or deferred periodic payment offer, or a signed Form 656-A, Income Certification for Offer in Compromise Application Fee and Payment.
Also, if the IRS believes you are filing an Offer in Compromise strictly for delay, they will reject your Offer in Compromise and not deem it “processable.”
NOTE: If you offer 20% Offer in Compromise lump sum the IRS keeps even if they reject your Offer. That is why it is essential to be absolutely positively sure your Offer in Compromise competitive, and has a likely chance of success. If you are close to giving the IRS thousands of dollars without getting an opinion from a firm that actually Offers in Compromises accepted, you are risking losing your down payment and wasting time.
It takes about 3-6 weeks for the IRS to deem your Offer in Compromise “processable.”
Second Step: Assignment to an IRS Offer in Compromise Examiner
Your Offer in Compromise will then be sent to an IRS Offer in Compromise Examiner. These examiners are located all over the country. The IRS Offer in Compromise Offices we usually deal with are Holtsville, New York, Memphis, Tennessee, along with Atlanta and in Dallas. It takes about a 4-6 weeks to receive a letter from your Offer in Compromise Examiner. This letter will simply state who they are and give you their contact information. The letter lets you know they will contact you with any questions.
Third Step: Examination by IRS Offer in Compromise Examiner
Your Offer in Compromise Examiner will then go through all of the documents you submitted. The job of the Examiner is like the job of a regular IRS auditor, but in addition to finding out what your true income is, an IRS Offer in Compromise Examiner will also audit your assets to see what those are worth. Their job is to determine what your Reasonable Collection Potential (RCP) is over the remaining collection period. It is important to note — the IRS is not stupid. They just don’t agree to take less because you fill out some paperwork. An Offer in Compromise is only accepted when you agree to give the IRS an amount you what they would be able to get form you through enforced collections. The IRS like the Offer in Compromise program because it is cheaper (and more politically expedient) for them not to have to levy or garnish you.
This step can take anywhere from 4 weeks to 8 months, depending on complexity.
Fourth Step: Agree or Disagree and rebut Examiner
Next, the Examiner will either accept your proposed amount or reject it. It is important to note, if you are rejected, and you have valid counter-claims to raise them.The Examiner may also give you an opportunity to increase you Offer amount.
If you Offer in Compromise is accepted, at this point, it likely took about 6-8 months.
If you have to rebut the rejection and then are accepted, the process will take about 8-12 months.
Fifth Step: Appeal or not to appeal
If your Offer in Compromise is rejected, you may appeal it to the IRS office of Appeals. And hopefully, you raised all important issues with the Offer Examiner thoroughly, so that you are only arguing a specific and properly documented issues. Offer in Compromise appeals officers are more likely to accept a previously rejected Offer in Compromise when they are given very concrete, very reasonable, well document reasons that shed a light on the true nature of your Reasonable Collection Potential.
If you had to appeal to accepted, the entire Offer in Compromise processing time will take 14-24 months.
NOTE: All times are according to our own experience. Your experience may vary.