Offer in Compromise: Think Twice If the Statute of Limitations is Almost Up.
The IRS has ten years, from the date the tax is assessed, to collect unpaid taxes. Once that time has expired the IRS MUST seize ALL collection actions and the debt is wiped off. That is why, if your Statute of Limitations is close, you really need to evaluate if an Offer in Compromise is the best option as a tax resolution. Below are the reasons why this is so important.
- An Offer in Compromise extends the Statute of Limitations. The submission of an Offer in Compromise stops the IRS collection process. Anytime the IRS is stayed from collections, the Statute of Limitations is tolled (extended) during this time. If your Offer is rejected, you are starting over with an addition nine to eighteen months added to the statute.
- An Offer in Compromise takes a long time. If you are looking for a quick solution to help you sleep better at night, the Offer in Compromise is not for you. The Offer in Compromise process is a long drawn out and stressful process with long periods of the unknown.
- Will your debt expire before your longest payment period in the Offer. An Offer in Compromise will take anywhere from nine months to eighteen months to complete. If we assume the offer takes 12 months to be accepted and you chose to file a deferred offer, that would mean it would be 36 months before your debt is considered paid in full. If your Statute of Limitation expires in less than 36 months, you should not consider an Offer in Compromise as a resolution to your tax debt.
- If the Offer is rejected you are starting over. Let us again assume the Offer takes 12 months to reach a decision and you do not like that decision, so you appeal. You can add another three months, so now you are at 15 months and that is if everything goes smoothly. Can you imagine if everything is a disaster and you are denied in the end? You could have added 21 to 24 months to the Statute of Limitation and you are starting over!
Carefully review points 1 through 4 above. Over the years we have seen way too many taxpayers who come to us after submitting a bad offer, who would have been done with the IRS if they held back and considered other resolution options.
Should you get help?
I have seen many people try to prepare their own OIC and fail because they do not fully understand the art of dealing with the IRS. Yes, you can submit an Offer in Compromise yourself but if you are trying to considerably reduce your debt, I recommend you rethink your position.
An “accepted” OIC is not the same as a “successful” OIC.
There is more to it. Sure, the average taxpayer can fill out the forms and after spending hours reading and rereading the instructions provide the substantiation needed for an application to be accepted. How do you measure success? To me, success is measured with an approval on the LOWEST DOLLAR AMOUNT the IRS will accept.
If you feel that you may be in over your head, or just want to get a second opinion, let’s set up a short call. To avoid the back and forth emails and phone tag, I have included a link to my Calendar https://calendly.com/taxman/tax-problem-resolution-initial-consultation. Let’s set up a 30 min. phone conference to get to know each other. The phone number to call is 855-829-5877 and my extension is 203.