IRS Denied My Offer in Compromise, Saying I Had a Dissipation of Asset; Why?
Rejected OIC- Dissipation of assets
This came in via chat regarding a gentleman who said his Offer in Compromise was denied because the IRS said he had a dissipation of assets. The IRS had denied his Offer as a full pay because they added back the distribution, he took out of his 401K to pay off his credit cards. I asked him four questions, 1) How long ago did you distribute the funds? 2) How much did you distribute? 3) What was his IRS debt? 4) How much disposable income did it free up to make IRS payments? To the first question he answered it was two months before the Offer was submitted. To the second question he indicated it was $55K. To the third question he indicated it freed up $1,050/month and he owed $104K. I informed him it may be possible to obtain a waiver of the dissipation of the assets if it benefits the service, but it would require the skills of a Certified Tax Resolution Specialist. He should not try this on his own. I am happy to report, we were able to get the Offer approved.
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 13, Dissipation of assets
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.