Last year the IRS received over 59,000 offers in compromise, accepted 24,000 plus, & the average settlement was $9500.

Just like everything there is a system, know the system, you can win, not know it, you lose.

I am a former IRS agent and teaching instructor with the IRS, I know the system, you can settle if you met the requirements.

I know my business very well.

As a former IRS agent I accepted and rejected offers in compromise.

Agents who work offers in compromise:

Every IRS agent who works an offer in compromise must have training to understanding everything there is to know about the offer in compromise, what to look for, whose to accept and whose to reject. I taught the class.

I have looked at a myriad of offers in compromise throughout the years. I started working at IRS in 1973 and have been practicing ever since.

What I tell you in this blog is exactly some of the tricks or the so-called “art” of the negotiation.

How IRS Looks at Offers in Compromise:

The Internal Revenue Service does not have to accept offers in compromise and they consider it a gift to the taxpayer to even consider settling for pennies on the dollar. You’ll find many agents have that attitude. Some are a little kinder and others make it a real chore to get your case to the system.

It is much easier for the agent who works the offer to reject the offer then to accept the offer. If the agent rejects offer in compromise, the service simply sends out a form letting you know the reasons for denial, the formulas they used and the reason for rejection. It is cold, hard, and on to the next case.

To accept the offer in compromise means reviews by sometimes three levels within the IRS institution before the offer becomes accepted. Many times the offers have to go the District Counsel, the attorneys of the IRS. Larger cases must be signed off by attorneys.

Why is IRS so strict about the acceptance of the offer in compromise?

The offer in compromise becomes a matter of public record for 18 months at one of six district offices across the United States for the public to review.

That’s right, anybody can go and to one of the six district offices and review any accepted offer in compromise. You think there would be some curiosity seekers about this but the statistic may be a little surprising. Only one person in the last year reviewed offers in compromise throughout the United States.

Internal Revenue Service has set forth certain standards for accepted offers in compromise, and those are not to be broken.

7  Aspects to keep in mind to get an offer i n compromise accepted


1.Documentation is always “king”.

Most offers in compromise do not have sufficient documentation and they are rejected as they goes through the system. The package simply must have air tight docs.

There are generally only two things that do not have to be substantiated and they are generally, food and clothing allowance and the gas and transportation. Everything else needs to be fully documented. The experienced negotiator make sure they have a tight knit package and anything out of the norm is fully explained and documented.



2. Painting the Picture:  Make sure you show the full picture of the taxpayer’s inability to pay.

One of the things I fully document is what is really going on in the life of the taxpayer that may not be reflected or seen on the financial statement.

If there have been medical events, catastrophes, casualties or other such traumas that existed in the financial life, I place them and document in my package. The financial statement and its documentation is your canvas to paint the picture of the reality of the financial hardships that go to the life of the person. Make sure you fully document and have an attached package of all the issues that may be going on in the life of the taxpayer so the taxpayer becomes human to the reviewing agent and the agent is not just looking at a piece of paper. Let the taxpayer become alive.



3. Tell the Story: Write and attached letter of the reality of life for the taxpayer.

When an agent who reviews the case looks at the file the first thing they are looking for is the associated documents that IRS requires. The agent gets a feel for the case immediately and sometimes presupposition forms about what they’re already thinking about the case. I attach a cover letter on the top of the offer and on the back of the offer so the first thing the agent looks at is my cover letter about the reality of this case so I and let the agent know what’s going on in the life of this person.



4. As far as the negotiation goes……….. read more,

When the Internal Revenue Service looks at the 433a OIC, and its associated documentation IRS will apply the strict national, geographical and local standards to the case. One of the things that I try to do is get some other goodies included in the national expenses. Many times taxpayers have other expenses such as having a child that has special needs, may need extra medical help or a plethora of other reasons that do not fall into the normal category of acceptable expenses.

I make sure this reasons are completely documented by doctors notes or any other reasons to support the extra expenses that are reasonable and necessary things taxpayers survive. I have gotten holistic meds included.

More than anything, do not let IRS bully you into accepting the strict national standards. Almost every taxpayer has exceptions to the national standards. Just make sure they’re fully documented.



5. Always use of the appellate function if your case is denied.

You will find that appeals is far more gracious and generous than the local agent.

Any case that’s denied, I automatically appeal. Always!

Many times the appellate agent wants to close their case and is a lot more acceptable to closing the case out if you send in a little more documentation.

You will find the local revenue officer sticking stricter standards than the appellate agent who is much more experienced and a little more looser. If your offer gets denied always go to the appellate function.



6.Getting info back from IRS. When you get the report of the IRS back letting you know the offer was rejected…

This is your time to negotiate.

Look at the report, contact the agent and prove there calculations are wrong. How do you do this, by documentation alone.

You must have them rethink there assessment. Depending on the agent, some are lazy and some intelligent. Documentation is key!

The two areas their assessments will be incorrect are the value of the assets or when IRS considers reasonable and necessary expenses.If it is because of values, provide another set of complimenting value assessment, and if it necessary standards, find their error and document.


7. Other expense rules:

Other Expenses, In certain circumstances, IRS may allow minimum payments on other expenses, such as student loans, unsecured debts, tuition or contributions if required for employment, etc. Attach a list and explanation.

Expenses not generally allowed: IRS

Generally do not allow tuition for private schools, public or private college expenses, charitable contributions, voluntary retirement contributions or payments on unsecured debts.

However, we may allow the expenses if proven that they are necessary for the health and welfare of the individual or family or the production of income. See Publication 1854 for exceptions.

Final thought:

Always keep in mind the IRS has a plethora of information available to them about the taxpayer. Besides their internal checks, they also use the accurate search engine and credit reports to make sure there is no lies being told on the financial statement.

Before I go ahead and submit an offer in compromise I spent time doing my due diligence.

Tips Getting the IRS Offer in Compromise Accepted by a  Former IRS Agent, Revenue Officer.