Offer In Compromise Denied! Now What?

TL;DR: You’ve received the dreaded news: your IRS Offer in Compromise has been denied. Now, you’re left wondering what to do next. Don’t panic! You still have options. The key is understanding why your OIC was denied and figuring out the best strategy to move forward. This guide explains who qualifies, the rules that apply, and how to apply them to your situation.

You’ve received the dreaded news: your IRS Offer in Compromise has been denied. Now, you’re left wondering what to do next. Don’t panic! You still have options. The key is understanding why your OIC was denied and figuring out the best strategy to move forward. In this article, we’ll guide you through the possible reasons behind the denial and explore the resolution options still available to you. From discussing your case with an Offer Specialist to considering alternative solutions like installment agreements and penalty abatement, we’ll help you navigate the next steps and find a way to resolve your tax debt.

Understanding Your OIC Denial

While it’s necessary to understand why your Offer in Compromise (OIC) was denied, it’s equally crucial to distinguish between a denied OIC and a returned OIC.

Returned vs. Denied OIC

Denied, but not defeated! A returned OIC is different from a denied OIC. If your OIC was returned, you’ve either made a mistake completing the form(s), and/or are not eligible or both.

Common Reasons for a Returned OIC

Returned, but not rejected! Common reasons the IRS returns an OIC include missing signature or incomplete form, missing application fee or initial payment, being currently in bankruptcy, an open audit or submitted an Innocent Spouse Claim, not being in current tax compliance, not listing all outstanding tax liability periods on form 656, and many other reasons.

Returned OICs can be resubmitted after fixing the issues. However, it’s necessary to double-check that your calculated “Collection Potential” is less than your total tax liability (including penalties and interest). This ensures you’re on the right track before resubmitting your Offer.

What’s Next?

Clearly, having your Offer in Compromise (OIC) denied can be frustrating and overwhelming. But don’t worry, you have options. Let’s explore what’s next and how to move forward.

Determining Qualifications for an OIC

What’s vital now is to reassess your qualifications for an OIC. Review the formula: Equity in Assets + Ability to Pay Monthly < Total Tax Liability. If you still believe you meet the qualifications, you can proceed with an appeal or discuss it further with the assigned Offer Specialist.

Factors Involved in the OIC Process

Qualifications aside, there are numerous factors involved in the OIC process. These include:

• IRS’ Collection Financial Standards
• Production of Income Test
• Health and Welfare of the Family Tests
• Quick Sale Values
• Exemptions per the IRC
• Age, education, work and earnings history, health, and more
• Thou shall consider all these factors to ensure a thorough understanding of your situation.

Process these factors carefully, as they can significantly impact your OIC outcome. Do not forget, the IRS wants to collect as much as possible, so it’s crucial to demonstrate your inability to pay.

Next Steps

Now that you’ve reassessed your qualifications and considered the factors involved, it’s time to decide on your next move. You can appeal the denial, discuss it with the Offer Specialist, or explore alternative solutions like Full Pay, Installment Agreements, Partial Payment Installment Agreements, Currently Not Collectible Status, or Penalty Abatement. Thou shall take control of your situation and choose the best path forward.

Alternative Solutions

Now that your Offer in Compromise has been denied, it’s necessary to explore alternative solutions to resolve your tax debt.

If you’re struggling to find a way forward, don’t worry, we’ve got you covered. Let’s probe some practical alternatives that can help you tackle your tax debt.

Full Payment

With a lump sum payment, you can eliminate your tax debt and avoid further penalties and interest. Although this might not be feasible for everyone, it’s an option worth considering, especially if you can secure a loan or refinance to cover the amount owed.

Installment Agreement

Installment agreements allow you to break down your tax debt into manageable monthly payments. This solution is often the most suitable for many individuals, especially when combined with a successful Penalty Abatement.

To make the most of an Installment Agreement, it’s crucial to understand the different types available and their benefits. Our experts can guide you through the process and help you negotiate the best possible agreement.

Partial Payment Installment Agreement

Solutions like Partial Payment Installment Agreements offer a hybrid approach, blending the benefits of Installment Agreements with the settlement opportunity of an Offer in Compromise. This option allows you to make monthly payments while also reducing your total tax liability.

This solution requires careful consideration of your financial situation and tax debt. Our experts can help you determine if a Partial Payment Installment Agreement is the right fit for you.

Currently Not Collectible Status

Currently, if you’re unable to make monthly payments but have equity in assets like your home, Currently Not Collectible (CNC) status might be a viable option. This solution allows you to temporarily halt payments toward your back taxes, as long as you stay current with your ongoing tax obligations.

Partial payment plans can be complex, and CNC status requires careful evaluation of your financial situation. Our experts can help you navigate this process and determine if CNC status is suitable for you.

Penalty Abatement

Partial penalty relief can significantly reduce your total tax liability. To qualify, you’ll need to secure a formal resolution to your tax liabilities and demonstrate reasonable cause for the penalties incurred.

Full penalty abatement is possible in certain situations. Our experts can help you understand the eligibility criteria and guide you through the application process.

Conclusion

Taking this into account, if your Offer in Compromise has been denied, don’t panic! You have options. It’s crucial to understand why your OIC was denied and determine the best course of action for your specific situation. Whether you appeal the decision, explore alternative solutions like installment agreements or penalty abatement, or seek professional guidance, you can still find a way to resolve your tax debt. Note, you’re not alone, and with the right approach, you can overcome this setback and move forward.