IRS Denied My Offer in Compromise and Said My Living Expenses Were Too High; Why?
Rejected OIC- Living expenses are considered excessive
This came in via chat regarding a lady who said her Offer in Compromise was denied because the IRS said her living expenses were too high. The IRS had denied her Offer as a full pay because they felt her housing expenses were too high based on the National Standard. In particular, it was her mortgage payments. I asked her four questions, 1) How was her credit 2) Was there any equity in the home? 3) Could she sell? 4) If she could sell, would renting be any lower than her mortgage payment? She said her credit was horrible due to the tax lien and defaults on some credit cards. She said there was no equity in the home, and because of the depressed market, she could not sell the house. She said that a lease payment would not likely be any lower than her mortgage. I told her it may be possible to get an increase in her allowable expenses for housing, but it would require the skills of a Certified Tax Resolution Specialist and that she should not try this on her own. She called back six months later and said that she should have listened to me because her Offer was denied. I said, I hate to say it, but we could have gotten you the variance and saved your Offer.
The following are the most common reasons for denial of an Offer in Compromise:
- Failure to maintain compliance by making estimated payments
- Missing information
- Failure to disclose assets
- Failure to maintain compliance due to outstanding returns
- Active Bankruptcy
- Frivolous submissions
- Failure to pay the processing fee unless below a specific income level
- Failure to maintain compliance in the 5-year look-forward period
- Failure to make the non-refundable payment with the application
- Default on a previously accepted Offer
- Do not qualify for an Offer- Considered Full Pay
- Living expenses are considered excessive – Considered Full Pay
- Dissipation of assets
This is item 12, Living expenses are considered excessive
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.