How to Handle an Offer n Compromise Rejection
It is very disappointing to get an Offer in Compromise (OIC) rejection letter after many months of waiting. However, you still have options for resolving your tax debt. You can attempt to negotiate issues with the OIC Examiner, take your case to IRS Appeals, or consider other tax resolution options.
Work Through the Rejection
You should receive a rejection letter from the OIC Examiner. This letter should indicate what caused the rejection. Remember you have a truly short window to contact the Offer Examiner before he/she closes the case. Offers are usually rejected for one of two reasons, 1) The Examiner felt the offer was not properly supported, or 2) The Reasonable Collection Potential exceeded your Offer amount.
Sometimes, Offers are rejected because you did not properly complete the forms, or you did not provide the proper documentation to support your deductions or asset values. You will need to quickly determine the nature of the problem(s) and determine if it is possible to correct them. Next, you will immediately want to contact the Offer Examiner and request to submit your revised information or supporting documentation. If the Offer Examiner refuses to except the new information, you have two options, 1) Request to talk to the Offer Examiner’s Supervisor, or 2) Appeal the Offer.
The most common substantive reason OIC’s are rejected is that your Reasonable Collection Potential (RCP) exceeded your offer amount. You will need to review the Offer Examiners calculation of the Reasonable Collection Potential and make your arguments point by point. Make sure any changes are properly supported with documentation. If the Offer Examiner refuses to accept your dispute, you have two options. 1) Request to talk to the Offer Examiner’s Supervisor, or 2) Appeal the offer.
Appeal Your Offer
If you disagree with the outcome reached by the OIC Examiner, such as the value of your equity in certain assets or your allowable expenses, and you feel you have a good case, you should appeal your Offer outcome. Keep in mind you only have 30 days from the date on the rejection letter to file your official Appeal, so make sure you move quickly.
Appeals Officers are also generally going to defer to the findings of the OIC Examiner who has already spent several months working on your case. Make sure you have a legitimate dispute and supporting documentation to show why your arguments are valid. Get ready for your Appeals hearing as if it was court hearing and be extremely well prepared to present your argument and dispute any potential counterarguments.
Other Options
You have other options if your OIC is rejected, including withdrawing your offer or exploring your other tax resolution options. The other potential options are as follows:
- Partial Pay Installment Agreement
- Full Pay Installment Agreement
- Currently Not Collectible Status
- Innocent/Injured Spouse
- Bankruptcy
Even if you must pay back your tax debt in full, you can negotiate terms that work within your budget. You should make sure you have considered all the available tax relief strategies.
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.