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Should Taxpayers Listen to Advice to File an Offer in Compromise?


Our tax pros often hear from clients who received advice to file an Offer in Compromise from an IRS collection agent, their accountant, or a friend who knows little, if anything, about settling with the IRS.


Should you be comfortable listening to advice from someone urging you to file an offer in compromise?

Not unless it is a Tax Attorney, a C.P.A., or an Enrolled Agent who has a long track record of successful Offer in Compromise submissions.

To begin with, an IRS collection agent, whether it is a Revenue Officer or Automated Collection Service (ACS) representative, is usually not qualified to give you settlement offer advice.

IRS collection agents are not trained to investigate an offer in compromise. Their background is how to collect taxes from you, not how to settle a tax liability. These collection agents never, ever investigate an IRS Offer in Compromise and do not have a say in the decision to accept or reject them. IRS Revenue Officers and ACS representatives have absolutely nothing to do with the Offer in Compromise process (#OfferinCompromise).

The only IRS agent trained to compromise your taxes is an offer in compromise "Examiner." It will be the offer in compromise investigator who decides whether your settlement offer will be accepted or not.

Why would an IRS collection agent, having no Offer in Compromise experience, telling you to file one?

The IRS representative could want the best outcome for you, and thinks you deserve the clean slate that comes with compromise acceptance. The advice may be made in good faith.

But other times, an IRS collection agent recommends a compromise to move your file off their desk. An IRS agent always wants to do two things. One is to collect money and the other is to close a file. Closing a file is actually more important than collecting money.

Here’s what could be going through your IRS collection agent’s mind when recommending you file an offer in compromise:

1. IRS is required by law to stop all collection enforcement action against you when your offer is filed.

2. It has been taking the IRS 10 to 12 months to investigate an Offer in Compromise (OIC). Due to the COVID problems, it could take more time. The must bring an Offer in Compromise submission to a conclusion within 2 years. If the 2 year time limit expires, the settlement offer is automatically approved.

3. Your file will be in the hands of the IRS compromise investigator, not the collection agent, during this entire time.

As written above, the IRS agent may be motivated to "pass along" your file. Their intent may not be influenced by what is best for you, but rather by what is best for their work flow and case inventory.

Your accountant may be well-trained in accounting, but an offer in compromise is a different world. It is not about accounting rules, but IRS rules.

The IRS has a rule book, called the Internal Revenue Manual, with an entire section dedicated to the investigation of offers in compromise.

The Internal Revenue Manual’s rules on a compromise includes:

a. Conditional and necessary living expense allowances that the IRS uses as oversight on your lifestyle and spending. (food, clothing, car payment(s), utilities, health and term life insurance, child support, etc.)

b. Review and valuation of bank account balances.

How to calculate the net realizable equity and reduce the value of your property.

c. Documenting your wages, mortgages, car loans, student loans, and divorce obligations.

d. How to calculate and reduce the equity in your house, car, and household belongings by using their quick sale value.

e. Documentation and rules to value retirement accounts.

f. Formulas to calculate your future earnings and ability to pay the IRS until their collection statute expires.

g. Exemptions in your property that allow you to protect it from the IRS.

h. Allocating shared expenses and a non-liable partner’s income so that person does not pay your IRS debt.

i. Reducing the value of business assets.


THE TAX PROFESSIONALS AT FLAT FEE TAX RELIEF HAS A 96% OFFER IN COMPROMISE SUCCESS RATE.

Be careful taking advice to file an offer in compromise unless that person knows the rules in the Internal Revenue Manual, has completed a review of your earnings, living expenses, property ownership and debts, and has shared with you their calculations as to how you match up.


This article is brought to you by the tax professionals at Flat Fee Tax Relief. For more than a decade, our teams have been providing valuable Tax relief programs at very affordable fees.


Our IRS pros provide IRS tax debt help from coast to coast as we are located in Clearwater, Florida, and San Diego, California. This allows us to be available from 8 A.M. Eastern to 6 P.M. Pacific time.

FOR MORE OFFER IN COMPROMISE INFORMATION:


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