The Internal Revenue Service has an official program for accepting settlement offers, called an Offer in Compromise (OIC). However, a recent article reminds us that there is no guarantee that an IRS agent will accept an OIC. In fact, less than one-third of all OIC's are accepted.
As an attorney and certified public accountant that has helped many struggling taxpayers, the first step in evaluating appeal or litigation options is to understand why an OIC was rejected. The most objective reason might be that an individual has accumulated more tax debt during the pendency of his or her OIC. Those who are up-to-date with their tax obligations may be better positioned to pursue settlement for past tax years.
Another common reason for rejection is that a taxpayer failed to submit adequate documentation with his or her OIC. The IRS will want a comprehensive picture of a taxpayer's ability to pay, which includes an inventory of the individual's assets and income. The IRS may rely on that information to produce its own calculation of a taxpayer's ability to pay, called Reasonable Collectible Potential (RCP). An individual should carefully review those calculations to ensure that the IRS wasn't relying on incorrect information.
Finally, an OIC rejection doesn't have to be the end of the line for a taxpayer. Unfortunately, individuals with a tax problem may not realize that they can appeal an OIC rejection. As a tax attorney, I am very familiar with the procedural and substantive tax rules that can help an individual obtain a successful outcome in any dealings with the IRS. I also have experience as an auditor and forensic accountant. In combination, that expertise can provide both creativity and aggressive advocacy.
Source: Examiner.com, "Top reasons why the IRS rejected your Offer in Compromise," Anthony Parent, Sept. 18, 2015