Jan 2, 2008

Offer in Compromise Series- Preface #3- Congress wants the IRS to accept OICs!

Most people believe the IRS is predisposed to not allowing Offer in Compromises ("OIC"). If fact, the professional tax community believes so also and has constantly lobbied for more liberal OIC interpretations by the IRS. The recent 20% pay-in requirement is an obvious example of the IRS influence on Congress in stiffening the OICs filed.

IRS Policy Statement 5-100 (approved in 1992) states that the IRS should accept Offers if it is in the best interest of the Government. In fact, in most cases it is in the best interest of the Government. The General Accounting Office and the Taxpayer Advocate Service ("TAS" or known also as the Taxpayer Advocate Office or "TAO") have shown that 40% of IRS rejected OICs end up "currently not collectible"- hence- the Government gets nothing!!

PS 5-100 states:

The ultimate goal is a compromise which is in the best interest of both the taxpayer and the Service. Acceptance of an adequate offer will also result in creating for the taxpayer an expectation of and a fresh start toward compliance with all future filing and payment requirements.

The GAO and TAS studies both show that 80% of OICs accepted by the IRS result in compliant taxpayers that stay in the tax system at least 5 years!!

Hence, Congress is aware that it is in the best interest as the data reflects this to be true! However, the IRS is predisposed to allow OIC access to taxpayers (data reflects this in the TAS study).

You need to have someone who knows the system to fight for your rights. The IRS has many manuevers to limit your access to the OIC from not processing the OIC, to rejection, to requesting withdrawal or withdrawing you after a limited non-response period. In any event, you cannot go this alone and expect to successfully maze through the IRS.

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