IRS Rejecting Huge Number of Offers

According to an article in the July/August 2003 issue of the EAJournal, Offers in Compromise are being sent back in record numbers

The IRS met with tax professionals at its Centralized Offer in Compromise (COIC) facilities at the Brookhaven (New York) Campus on April 24, 2003. The COIC units in Brookhaven and Memphis work all cases involving wage earners except in complex cases. According to the IRS, 60-65% of all Offers are worked at the COIC units.

In the fiscal year ending September 30, 2002, over 64,000 cases were disposed of at Brookhaven and Memphis. Over 56,000 were either not processable or returned by the IRS. Of the remaining 7,900 cases, nearly 5,200 were rejected by the IRS or withdrawn by the taxpayer. Only 2,739 Offers were ultimately accepted. That means only 4.2% of all the Offers disposed of by the two COIC sites were accepted! 

Of course, this brings up a very important question. Why are 96% of these Offers not accepted???

Our experience tells us that there are a few probable reasons:

1)   A majority of the "not processable" and returned Offers were likely prepared by taxpayers without professional assistance;

2)   The IRS is doing everything it can to not have to work Offers in the first place by finding picayune reasons for declaring an Offer "not processable" or returning it;

3)   So-called "Offer mills" are submitting Offers that cannot possibly be accepted.

So, what is the best way to ensure that your Offer is processed and what gives you the best shot at acceptance? I could be very self-serving and simply advise you to hire Tax Matters. But, instead let's talk about what is going to work best for you.

1)  If you owe more than $10,000 or so, hire a tax professional (EA, CPA or attorney);

2)  Make certain that the tax professional you hire makes IRS representation a major part of his or her practice;

3)  If you cannot speak to the tax professional prior to signing a contract or paying money RUN as fast as you can;

4)  Don't sign a contract or pay a retainer until and unless you have thoroughly discussed the matter with the tax pro. It is Tax Matters's policy to give free consultations (by phone or e-mail) to anyone with a tax problem. While other tax pros may not do that, be certain that they have a complete understanding of your case and your financial status before giving them money.

Here's the bottom line. Since it appears that the IRS will do anything in their power to send back your Offer as quickly as possible; do your homework and hire the best tax pro you can find and submit a good Offer with full documentation as quickly as you can.

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