An Offer in Compromise, or OIC, can relieve people from significant tax burdens. However, the IRS considers each OIC individually and has the ability to turn down offers for various reasons. Rather than accept the refusal as the IRS' final determination, you can use these tactics to appeal the denial of your Offer in Compromise.
Reasons for Denial
The IRS can turn down your OIC for any number of reasons. The most common factors behind a refusal are:- The offer amount is too low or below the Reasonable Collection Potential, or RCP
- Failure to provide proper financial documentation like receipts, bank records, etc
- Conviction of a serious crime
- Failure to include the application fee with your OIC
- Living above the IRS Allowable Living Expenses limit
By law, the IRS must inform you of the reason it has turned down your OIC. It will notify you by letter; the letter will contain instructions for appealing the decision.
You must file your appeal within 30 days of receiving the OIC rejection letter. If you wait longer than 30 days, the IRS will refuse to hear your appeal and require that you apply for a new Offer in Compromise.
If you are still unsure of whether or not you can or should appeal the OIC rejection, you can find out for sure by using the OIC appeals resource found on IRS.gov. According to this tool, you must meet the following criteria before you can file an appeal:
- Receiving an OIC rejection letter from the IRS
- Being a W-2 employee
- Not having any rental properties
- Not working for yourself
Appealing Your OIC Denial
Before you appeal the IRS' decision to deny your OIC, you should first ensure that you can present a viable argument and support your case with facts. It is recommended that you be prepared to defend your argument that the IRS misinterpreted the facts of your case or the law as it applies to your OIC.You should also be ready to clarify why the action being taken against you by the IRS is inappropriate. For example, you could argue that you do not legitimately owe the debt or that the amount that you must pay is wrong.
Regardless of the argument you plan to make, you must back up your claims with verifiable and legitimate documentation. You should have ready paperwork like bank records, tax returns, receipts, and other proof to support your appeal.
Writing the OIC Rejection Appeals Letter
After you ensure that you have the proper documentation and proof to back up your case, you may then proceed with writing your appeals letter. The IRS requires that your letter contain specific information. Without this information, your letter may be dismissed and returned to you.The details that you must include in your appeals letter are:
- Your full name, address, and daytime phone number
- A statement that you want to appeal the findings of your case to the Office of Appeals
- A copy of the letter that you received that shows the proposed changes to your case
- The tax year and/or period for your OIC
- Facts to support your argument
- The law or authority that supports your argument
- The Penalties of Perjury statement, which can be found on IRS.gov or your OIC rejection letter
- Your signature under the Penalties of Perjury statement
However, you may stipulate other reasons like disagreeing with the amount that you owe or having special circumstances that affect your finances like:
- Being disabled and unable to work or earn an income
- Suffering from a long-term or fatal illness
- Living on a fixed income like Social Security
- Being retired and having a source of income from an IRA or pension
Presenting the facts of your case can be challenging and overwhelming. Rather than risk another denial from the IRS, you may fare better with your appeal by allowing a tax professional to help with your case. A tax pro will know what information to include in your letter and also tell you what paperwork and proof you need to bolster your case.
You have the right to appeal the rejection of your Offer in Compromise. You can compel the IRS to reconsider your case by keeping these important facts about the OIC appeals process in mind.
