Moving on to the Appeals Division
Suppose you are at the point where you have no more room to argue at offer specialist level. It is officially time to file that appeal and get your offer reconsidered.
Keep in mind that you appeal must be filed within 30 days of the date stamped on the rejection letter. If the IRS does not receive it, you will lose your right to an appeal with the Appeals Division.
Here is the good and the bad news about Appeals.
First, the bad news.
- Appeals officers are usually more senior IRS employees
- They usually have a good knowledge of the offer in compromise program (some are former offer specialists)
- They will almost certainly have a better understanding of the tax code than the offer specialist
- They will have the full case file from the offer specialist
- They are going to rely on their findings of the offer specialist as a default position unless there is something truly erroneous
Do not expect them to recalculate anything. Also, generally speaking, appeals officers are pretty busy people. They will have a limited amount of time to devote to the matter and most will tell you straight up what their intention is during your appeals conference.
Benefits of the IRS Appeals Division
So, I know what you are thinking. You say to yourself, “So, I am generally dealing with a more experienced person at the IRS who is not going to devote much time to my case file and who may be more inclined to fall back on the default position of the offer specialist … Where is the good news in that?”
Fear not. There are several advantages to dealing with an appeals officer.
First, I have found the appeals officer generally has more latitude to reach a settlement on an offer in compromise. The focus of the appeals office is often to settle controversies prior to litigation and I have found that appeals officers often come into a matter with a mindset to settle it.
In addition, because appeals officers have a more mediatory role, I have found that the discussions on issues in appeals are a lot less adversarial than on the offer level. Although it depends on whom you are assigned to, I have found that the appeals officers are more likely to work with you on certain points.
Offer specialists, on the other hand, often will have to justify accepting an offer to their manager. While it rarely happens, I have seen instances where the offer specialist has tentatively approved an offer in compromise only to have it rejected by their manager.
Furthermore, since they often carry a large caseload, they have little time to spend dissecting the merits of each individual case and often will not fight with you over minor issues.
In fact, generally speaking, appeals will limit the discussion to any issues that you raise during the appeals conference.
Finally, because of their seniority, if appeals officers see from the case file that your position is clearly the right one and that your offer should be accepted, they will often just push the offer through without the need for a formal appeals conference.
Their experience often exposes them to many different controversies and if your arguments are credible (as they should be since you are appealing), they will often fast track the resolution of your offer in compromise.
Tips for a Successful Offer in Compromise
Many offers in compromise applications are returned because they are incomplete. The IRS cannot process an offer if it is missing elements specific to applications and related documentation. To be eligible, all filers must not have an open bankruptcy case, must have filed all federal tax returns at issue, must have filed payroll tax returns and deposits at issue for the last two quarters, must pay the required application fee ($150), must complete and submit Forms 656, 433-A, and/or 433-B (if necessary), and must be current with estimated taxes and income tax withholding for the current year.
The most important tips for a successful OIC is to pay the offer amount; file all tax returns on time; allow the IRS to keep any tax refunds, payments, and credits to reduce your tax liability; and continue to let the IRS keep any tax refunds payable to you even after the OIC is approved.
Lastly, choose a tax professional to help you with the offer in compromise requirements. Because of the complexity of the process, taxpayers often hire a tax professional knowledgeable about the dynamics of the program. You want a tax professional who is experienced and knowledgeable about this area of tax law and truly understands your OIC requirements.
In conclusion, despite some of the advantages of going to appeals, it is always better to try and resolve an offer in compromise before you get there.
Successful offer in compromises begin at the preparation level by putting together a package that is well-organized and gives the IRS every opportunity to accept your offer in compromise. If you are assigned to an offer specialist, do everything you can to get your offer in compromise resolved at their level.
Be communicative with them and try to engage in negotiations prior to them rejecting your offer. Often it is much easier to get an offer accepted prior to them rejecting it than to save an offer when a rejection letter has already gone out.
When an offer is rejected though, it is not the time to despair. Carefully evaluate the position of the offer and what you can do to strengthen it to make it more favorable to the IRS. If need be, then you can either withdraw it or take the matter up with Appeals.
Offer in compromises are often difficult to get accepted, but by utilizing some of these best practices, I hope that this will increase your chances of acceptance.
One piece of advice that bears repeating is that you are better served having an experienced tax professional represent you in your dealing with the IRS. The average taxpayer just does not know all of the ins and outs of the IRS and how they operate.
Your best chance of having your OIC approved is to prepare and present it correctly to begin with, and having an advocate who can keep one step ahead of the IRS is a huge advantage. If you are considering submitting an OIC to the IRS, or have had one already rejected, give me a call. Odds are that we can resolve your OIC issues and keep it out of the appeals process.