An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles the taxpayer’s tax liabilities for less than the full amount owed. If the liabilities can be fully paid through an installment agreement or other means, the taxpayer will in most cases not be eligible for an OIC. Every year thousands and thousands of OIC are filed by taxpayers hoping to pay the IRS “Pennies on the Dollar”. The IRS accepts about one (1) in every four (4) offers; those are not great odds. So, what to do when the IRS rejects your OIC?
If the IRS rejects an OIC, then the taxpayer will be notified by mail. The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals. The appeal must be made within 30 days from the date of the letter. In some cases, an OIC is returned to the taxpayer, rather than rejected, because the taxpayer has not submitted necessary information, has filed for bankruptcy, has failed to include a required application fee or nonrefundable payment with the offer, or has failed to file tax returns or pay current tax liabilities while the offer is under consideration. A return is different from a rejection because there is no right to appeal the IRS’s decision to return the offer.
The appeal’s process might seem like a long-shot, but the reality is that you have a better shot at getting your offer accepted in the appeal’s process.To start, you need to fill out IRS Form 13711, Request for an Appeal of Offer in Compromise. This will get the ball rolling by showing the IRS that you believe your offer was unfairly rejected. Complete IRS Form 2848 if a tax professional will be signing the Form 13711. Once you are ready, send the letter to the address provided in your rejection letter. If you would prefer to handle this another way, then you can send your own letter into the IRS stating you want to appeal your OIC with the following information:
- Your Contact information (specifically, your name, address, phone, and SSN)
- A copy of letter IRS sent you that confirms their rejection
- The Tax years covered by the OIC in question
- The Details of the OIC submitted
- Any Documentation or Facts supporting your disagreement with the IRS’s decision
Just keep in mind, you must sign the letter stating that all information is true. This statement is made “under the penalties of perjury,” Again, once you are ready, send it to the address the IRS indicated in your rejection letter. Sometimes refusing to take ”No” for an answer pays off.