In 2016 alone, the IRS had reportedly rejected 57.14% of Offer in Compromise (OIC) applications.
You can appeal an Offer in Compromise with the IRS and find out the reasons why your application was denied. Moreover, you should understand the difference between a returned Offer in Compromise and a rejected OIC.
What is the Difference between Returned and Rejected Offer in Compromise
There are numerous reasons on why the IRS rejects Offer in Compromise applications. The rejected application is different from the one that is returned. On the one hand, you cannot appeal an Offer in Compromise that is returned, but you can always resubmit the returned OIC for corrections.
On the other hand, a rejected OIC will have some repercussions on your record, but you can always appeal an Offer in Compromise with the IRS.
Most Common Reasons for a Returned Offer in Compromise
- No application fee
- No information provided to the IRS after a 14-day period of the request from IRS
- Bankruptcy has been filed
- Additional liabilities have grown during the application for an OIC
- Offer is considered “senseless” or done to delay IRS collections
- A similar offer has been submitted
- Did not pay monthly payments after deciding to have a periodic payment
Common Reasons for Rejections
- Very low offer
- High living expenses
- Full ability to pay
You should receive an explanation why your offer has been rejected. You can request for the information from the IRS if you didn’t receive anything.
How to Appeal an Offer in Compromise
You can appeal within 30 days from the date of the rejection letter. If the allowed time lapsed, your appeal for OIC will not be entertained.
The IRS online tool can help you figure out if you should appeal. The tool works if you meet the following qualifications:
- A rejection letter for Offer in Compromise application has been received
- W-2 employee
- You are not working for yourself
- You don’t own any rental properties
You can still file an appeal if your situation doesn’t fall on any of those mentioned above. Otherwise, you can use either of the two methods:
Method 1: Appeal an IRS Offer in Compromise
- Fill out and complete Form 13711 or a Request for Appeal of Offer in Compromise
- If a tax professional is signing your form, Accomplish Form 2848 or Power of Attorney and Declaration if you have a tax professional handle your situation
- Mail those forms to the address found on your rejection letter
Method 2 to Appeal an IRS Offer In Compromise
You can send a letter to the IRS if you don’t want to complete Form 13711. In your letter, you need to express your intent to appeal and make sure to include this pertinent information:
- Contact information (name, address, phone number)
- Social Security Number
- Copy of the rejection letter from the IRS
- List of those tax years for the tax debt
- Reasons why you disagree with the rejection
- Some documents that prove your disagreement
Make sure to state that all information is true under “penalties of perjury.” Have the letter signed and send it straight to the address found on the rejection letter.
How to Make a Bigger Offer After a Rejection of a Previous IRS Offer in Compromise?
If you don’t want to appeal a formerly rejected offer, you can do so for as long as you make a bigger offer than the previous amount.
All you need to do is submit the original paperwork together with a letter stating the increased offer amount.
Can a Tax Professional Help with an Offer in Compromise?
Yes, of course, the tax professionals know how to navigate the complex tax laws. They can help you achieve a higher chance for the IRS to accept your offer.
