Options after your Offer in Compromise has been Rejected
Question: What are my options after the offer in compromise I submitted has been rejected?
Answer: You still have a couple of options when your offer in compromise is rejected by the IRS. I am going to have to make an assumption in order to answer this question with some specificity. First, that you filed an offer in compromise based on doubt as to collectability meaning you owe the tax, but you don’t have the money to be able to afford to full pay.
The first thing I would do is to look at why your offer in compromise was rejected. Sometimes we can learn why the IRS has rejected your offer in compromise and resubmit an offer in compromise that gets around the issue that the IRS didn’t like the first time around. Sometimes it is an issue of income and expenses and other times it is an issue of equity in your assets. But many times, an offer examiner simply does not look at each issue as completely as we would like, or they simply do not have the discretion to vary from the IRS regulations.
The next option you have is to set up an installment agreement. Depending on the amount of money you owe the IRS, including taxes and penalties, you may be able to easily set up an installment agreement. If you owe over $25,000 you will be required to submit additional financial information and pay what the IRS says you should pay. I would recommend that you speak to a professional who deals with the IRS regularly if you fall into this camp because they will be able to assist you in negotiating the best monthly payment plan with the IRS.
Finally, there is currently non-collectable status. This means that based on your financial situation, your necessary living expenses exceed your income and the IRS will not take any collection action against you for a period of usually two years. As an aside, the IRS will almost 100% of the time file a tax lien against you if they haven’t already. Basically currently non-collectable means you can’t afford to pay your taxes right now and they are giving you some time to get back on your feet financially speaking.