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How to Plan for an Offer in Compromise during COVID

Updated: Jan 5

FLAT FEE TAX RELIEF

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Offer in Compromise IRS



The IRS, like all of us, has been affected by the COVID pandemic.

At the beginning of the pandemic, the IRS closed its offices, including their Offer in Compromise units. Unopened mail piled up and filings and cases sat unattended to for months. Now, the IRS is slowly catching up but they remain behind on processing and investigating Offer in Compromises.


Historically, the IRS has taken 10 to 12 months to finalize an Offer in Compromise (#OfferinCompromise). Expect your Offer in Compromise timeline to now exceed more than 12 months, possibly up to 18 months. Our tax pros believe that the IRS will be overwhelmed with tax debt to collect. We don't believe they have the staff to keep up due to the amount of people out of work or had their businesses lock downed and shuttered.

The COVID pandemic has caused the IRS to take longer to make decisions on offers in compromise.

Keeping the IRS delays in mind, it is also important to consider if your income has been negatively impacted during the pandemic when approaching an Offer in Compromise.

The IRS will use your earnings as a primary factor in calculating the amount the agency will accept in an Offer in Compromise. The greater your financial hardship, plus the expected increase in compromise submissions, the better your chances are for a successful Offer in Compromise.

When considering both the IRS delays and your reduced income, four different scenarios could unfold for your Offer in Compromise:


a. Your reduced income remains stable while your tax settlement is investigated and the IRS uses it to calculate your Offer in Compromise.

b. Your earnings increase while we are waiting for the IRS’ response, they update their records, and the cost of compromise settlement may increase.

c. Your earnings increase while we are waiting for the IRS’ response, they do not update their records, and your financial hardship benefits the compromise.

d. Your change in income is short-term and the IRS chooses to use your higher earnings from before the pandemic, which could hurt your compromise.

How can you know which scenario will be yours?

It depends on the IRS Offer in Compromise investigator who is assigned to your case

Many offer investigators (IRS Examiner) will take your Offer in Compromise as filed, with your COVID income, and not request updated information, while others will be more inquisitive. We want to work with the IRS investigator to minimize questions and accept your reduced COVID income for the best settlement.

Before the pandemic, the IRS accepted approximately 42% of the offers in compromise submitted. The number one reason for an Offer in Compromise to be rejected is due to the taxpayer submitting their own work. Nearly every novice will fail to do the Offer in Compromise correctly.


The IRS always has 2 goals. One is to collect money even if it's a reduced amount. The second goal is to close a file. A successful Offer in Compromise will do both. The job of the tax pros at Flat Fee Tax Relief is to present to the IRS "an Offer they can't refuse." The first part of the "offer experience" has the IRS doing nothing but looking for paper work mistakes.

When the agency finds an error, the IRS will return the OIC and label it "unprocessable." If the occurs, the tax debt goes back to collection enforcement and you will need to start over from scratch. The IRS rules and calculations remain the same. What has changed is the sheer number of taxpayers in financial trouble. That will work to your benefit. Success will be based on IRS approval of your financial inability to repay them.

The IRS is experiencing delays from the pandemic, taking longer than ever on its offer in compromise investigations. If your income has been reduced, you can come out of this with an offer in compromise settlement. Understanding how the IRS will respond to your settlement offer, and anticipating their response, can help get you through these times of hardship. This article is brought to you by the tax professionals at Flat Fee Tax Relief. Our teams have a 96% Offer in Compromise success rate. Over a decade, we have offered our expertise at very affordable fees.


We are strategically located in Clearwater, Florida, and San Diego, California. This allows our tax professionals to cover the United States from coast to coast. We are "ready to go" from 8 A.M. Eastern to 6 P.M. Pacific time.

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