If you filed an Offer in Compromise in an attempt to resolve your tax debt with the IRS, and your Offer has been denied, there is still something you can do to get it accepted. The IRS Offer in Compromise Unit is required to send you a letter explaining why your Offer was denied, and give you 30 days to file an appeal. It is very important not to miss this deadline; otherwise your Offer case will be closed completely.
To appeal your denied Offer in Compromise, you need to carefully review the IRS letter of explanations and complete form 13711, Request for Appeal of Offer in Compromise. This form has a specific section that you should use to explain your reasons for disagreement on each particular item. You can also draft a separate letter with all the facts that support your position, or any additional information that you would like to provide. Do not forget to include your name, address, SSN and contact phone number every time you write to the IRS. You will also need to enclose a copy of the IRS letter that denied your Offer in Compromise and any supporting documents that you have.
The IRS Office of Appeals is a separate IRS organization that allows its employees to provide their independent professional opinion about each case. Working with Appeals often saves taxpayers valuable time and money that they might otherwise spend going to the Tax Court. After your Appeal Request is received, you will be notified about the date when the Appeals Officer can discuss the case with you. You can meet in person, or discuss the problem over the phone. You can also chose to be represented by a tax professional, which is usually the best and fastest way to go through IRS Appeals. At 20/20 Tax Resolution we have extensive experience resolving cases with the IRS, including the IRS Office of Appeals.
It is essential to respond to all letters received from the IRS Office of Appeals in a timely manner. If you miss your scheduled Appeal hearing you might loose your right to appeal your Offer in Compromise denial. However, you can always be proactive and contact the Appeals Officer ahead of time to reschedule the hearing, if necessary.
It is also important to stay current and compliant with all your tax obligations. Although it is always a good idea to take care of your taxes, it becomes especially important when your case is being reviewed by the IRS, including Office of Appeals.
The IRS Offer in Compromise is a tax debt resolution option that is very appealing for many taxpayers because it sounds like a good deal. The idea behind the Offer is that a large part of your debt (not only penalties and interest, but even some of the tax due portion) is forgiven by the IRS as long as you pay a certain amount within a short period of time and, of course, stay current with your tax obligations from now on.
Many tax resolution companies use an Offer in Compromise example to attract potential clients to do business with them. What they usually do not tell you is that the IRS Offer is not an easy goal to achieve, and that not everybody who has a tax debt qualifies for it.
However, there is also good news about the IRS Offer in Compromise. It is called the Fresh Start IRS Program. In May 2012 IRS made major changes to the Offer in Compromise requirements to make it available for a broader range of delinquent taxpayers. The most important modifications that have been made affect the IRS allowable expenses and the potential income of the taxpayer that is used to calculate the Offer amount.
When the IRS calculates the amount for which the government will agree to settle your tax debt by accepting an Offer in Compromise, there are two main items that are being considered. These items are equity in your property and your disposable income. The Offer amount is usually a sum of equity you have in your assets and your monthly disposable income multiplied by a number of months. The old rule that the IRS used was to look into a taxpayer’s income for the next four to five years. This has been changed to just one or two years, depending of how fast you would like to full pay the Offer. If you can make a full payment for the offered amount within five month after the Offer in Compromise gets accepted, your disposable monthly income will be multiplied by twelve months. If you would like to spread your payments for six to twenty-four months, the IRS will look into two years of your future income and multiply your disposable income by twenty-four.
Another important item that has been changed in favor of the taxpayer is the IRS rule that is applied to expenses. When the IRS calculates your disposable income, it does not always consider the real amounts that you spend on food, transportation, housing and utilities. If your expenses are higher than National Allowable Standards, the IRS will most likely to apply their standards instead of considering how much you really spend. However, Fresh Start program increased National Allowable Standards and also added new categories of allowable expenses, such as student loans and state and local tax debt repayments.