South Carolina Tax Attorney

      I thought it would be interesting to look into and explain some of the more common reasons offers in compromise are rejected.  Many times it is not because the offer in compromise is unreasonable or out of line, but because the taxpayer simply does not respond in time.  Check out my Top 5 Reasons Your Offer in Compromise Won’t Be Accepted:

1. You are not current on your estimated tax payments for the current year.  When you file an offer in compromise, you must be current on your current year tax payments.  If you are an employee who works for wages and your employer holds out income taxes on your pay, then you are most likely okay.  If they hold out taxes and you still owe income tax each year, you need to adjust your W-4 with your human resources department so they will take out more from your check.  If you are self-employed, you will be required to make estimated tax payments each quarter.  I urge my clients to put that money aside in a special savings account monthly so you are not tempted to spend the money.  If you are not current, you can kiss that offer in compromise opportunity goodbye.
2. You did not provide all of the required information.  The IRS requires a lot of information from you when you file an offer in compromise.  First there is the $150 filing fee, then there is some sort of down payment depending on the offer type, and finally there is the financial form 433-A and all of the documents that it asks for.  If you do not provide the substantiation documents the 433 asks for like three months of bank statements and household bills the IRS will quickly send you packing.
3. You were dishonest on your financial form 433-A.  You may think you are doing yourself a favor by boosting some expenses or not claiming all of your income, but the IRS has "spy vision" and they can smell out a lie.  If you purposely leave out assets, the IRS will find them.  If you purposely leave off income, the IRS will figure it out.  Then once they have added that extra asset or income source, your offer in compromise goes down the tubes quick.  Therefore, be honest.  If you are not going to qualify for an offer in compromise, that is bad news, but the good news is you are not too bad off financially so you should be able to get out of the hole.  I would also like to point out that when you sign the form 433-A or B, you are signing it under penalties of perjury, so lying on that form is the same as lying under oath in court and will leave you with a host of other problems. 
4. You did not provide the required information by the IRS deadlines.  If you do not provide updated or new information when the offer examiner requests it, the IRS will quickly reject your offer in compromise.  Therefore, you should timely send in the requested information to the offer examiner.  If you need more time, don’t hesitate to ask the offer examiner for it.  If your request is not unreasonable, they are usually more than happy to give you some more time because it gives them more time to get some of the other offers in compromise off of their desk. 
5. Offering a ridiculously low amount.  Listen to your tax resolution professional.  If they tell you that you are only eligible to request an offer in compromise for the amount of $10,000 and you demand that they offer the IRS $1,000 be prepared to be sent home.  While I understand we provide a service to the client, I do not let the client tell me how to practice law.  I always remind the client that if you file an unreasonable offer in compromise, the IRS does not have to recognize it and they can continue to collect against you with some of the more unsavory collection methods such as wage garnishments and bank levies.