While there are many tips written about Offers in Compromise, few are from a former IRS Agent that taught Offers in Compromise at the IRS.
Most of the tips and advice I read are fairly accurate. The points I will bring to the table are told in light of how the IRS Agent, reviewer of Offers in Compromise, looks at a case.
Here are my top ten tips about Offers in Compromise:
1. Fill out the Offer in Compromise correctly. Seems simple, however, about 50% of the offers are returned for not being completely filled out. Make sure all the applicable boxes are completed. The IRS will return your offer in a heartbeat if it is not filled out completely.
2. The IRS will look to reject the offer first! Trust me on this. The IRS first eyes always look to reject. They are looking at all the reasons to send back or reject the offer. Why? It is less work for the Agents. Since IRS Agents are graded on inventories or case loads, they want to clear out their inventories.
3. File the Offer in Compromise during the worst time in your financial life. A lot of people wait until they start to make some money and decide to file the offer. Make absolutely sure your income levels are as low as they possibly can be. Make no deposits of self employment income before you turn in your offer, it may bump up your average income.
4. The base rule for offers is that you must give the IRS your total equity in all assets. If your assets total $9000 you must offer at least that. The IRS is very strict about this. You can use a low distressed value for your assets. Use liquidation values. Get an appraisal if necessary.
5. Be completely truthful. The IRS has been trained to sniff out stink on a case. This is all they do for a living. Do not lie!
6. Make sure the financial statements are filled out correctly. If you forget to fill out one box or put “none” on any section where applicable, the IRS can and will reject the OIC.
7. Provide all documentation. The IRS will want every figure documented with a check and invoice to prove this is your actual expense. They are very thorough on this issue. Get all documents to prove your case.
8. Check the IRS pub to find out what the IRS allows for expenses. For example, the IRS does not allow for college tuition. There is a complete list of dos and don’ts, so be forewarned.
9. Make sure all your tax returns are up to date and you are current on ES payments or adequate withholding is being taken out of your check.
10. The IRS will do a very thorough check on your Offer. Do not be surprised if they pull your credit report, google your name and use all types of searches to verify the worth of your assets.
Remember, 25% of all offers in compromise are accepted. Hire a professional tax firm and one that has a former IRS Offer in Compromise specialist like myself.
