IRS Offer in Compromise Processing Times: How long will it take?
by: Anthony Parent
The IRS Offer in Compromise Program is a great way to settle unmanageable tax debt. To give you an idea of just how long some of the processing times can be, we're going to take a look at a typical timeline and some of the hitches you might come across along the way.
First step: Get your offer in compromise deemed "processable"
The first step on the road to offer in compromise success is to get your proposal marked "processable" by the IRS. Think of this as building yourself a foundation for every other step. The stronger your foundation, the better your chance at moving forward as quickly as possible. "Processable," as defined by the IRS, means the following:
You are not a debtor in an open bankruptcy proceeding;
You have submitted the application fee or Form 656-A, which is the Income Certification for Offer in Compromise Application Fee and Payment; and
You submitted a 20-percent payment with the lump sum offer or a signed Form 656-A (see above); or, you have submitted the first installment payment on a short-term or deferred periodic-payment offer or a signed Form 656-A.
Also, if the IRS believes you are filing an offer in compromise strictly to delay collections, they will reject your offer and not deem it "processable."
NOTE: If you offer the 20% offer in compromise lump sum, the IRS is able to keep that amount even if they reject your offer. This is why it is absolutely essential that you are certain that your offer is competitive and has a likely chance of success. When lost, neither your down-payment or your time can be retrieved.
As for the window of time for being deemed "processable," it takes 3-6 weeks on average for the IRS to make their decision.
Second Step: Being assigned an IRS Offer in Compromise Examiner
Your offer in compromise, after being deemed "processable," will be sent to an IRS Offer in Compromise Examiner. These examiners are located all over the country.
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. It might not seem like much, but this is the letter that lets you know that your offer has been received and the information of the person who will be contacting you with any questions
Third Step: The examination
At this point, your assigned examiner will go through all of the documents you submitted. An examiner shares many of the same responsibilities as a regular IRS auditor, but in addition to finding out what your true income is, an Offer in Compromise Examiner will also audit your assets to find the total worth of everything that you own. Their job is to determine what your Reasonable Collection Potential (RCP) is over the remaining collection period.
At this point, I find it important to note - the IRS is not stupid. They won't agree to take less because you filled out some paperwork. An offer in compromise is only accepted when you agree to give the IRS an amount that they would be able to get from you through enforced collections.
This step -- the examination -- can take anywhere from 4 weeks to 8 months, depending on who you get as an examiner and the complexity of your situation.
Fourth Step: A) Agree or B) Disagree and rebut the examiner
During the fourth step, the examiner will either accept your proposed amount or reject it. If you are rejected, and you have valid counter-claims, it's necessary that you raise them. This is the time to get your claims on the table. Additionally, at this stage, the examiner may give you an opportunity to increase your offer amount.
On a lighter note, if your offer is accepted at this point, it's likely taken about 6-8 months. Not a short amount of time by any means, but when dealing with the IRS, things could be much, much worse.
However, if you have to rebut the rejection and then are accepted after the rebuttal, you can expect the process will take about 8-12 months.
Fifth Step: To appeal or not to appeal
If your offer in compromise is rejected, you're allowed to appeal to the IRS Office of Appeals. Hopefully, up to this point, you raised all the important issues with the examiner thoroughly, so that you are only arguing specific and properly documented issues. Appeals officers are much more likely to accept a previously rejected offer when they are given concrete, reasonable, and well-documented reasons that are able to shed light on the true nature of your Reasonable Collection Potential.
If you had no choice but to appeal to get your offer accepted, the entire processing time for your offer in compromise will likely be between 14-24 months. That's a significant amount of time.
NOTE: All times are according to our own case-history, and your experience may vary.
If you find yourself overwhelmed
Trust me when I say that I get it - tax problems are difficult. Not only are they complex, but they're often another added concern being piled onto the worries of the financial missteps that caused the problem in the first place. If you find yourself overwhelmed and stressed to a point you never thought possible, contact us. We can help. Call us at 888-727-8796 or email email@example.com.