Because of the complexity of filing an Offer in Compromise, Taxpayer’s are well advised to seek the help of a qualified and experienced tax professional. I highly recommend seeking professional advice in making an Offer in Compromise. Because Filing an offer in compromise requires significant expertise, selecting the right Tax Professional is of paramount importance. The tax professional you choose must have extensive knowledge concerning the laws controlling IRS collection of tax debts, the methods by which the IRS evaluates and processes offers, and must fully understand all of the various options that are available to resolve tax debt problems. Taxpayers would be wise to look for a tax professional with the proper qualifications, education and experience in IRS collection matters. Experience in dealing with revenue officers, the Automated Collection Systems division, and IRS Appeals is most critical when considering submitting an Offer in Compromise.
David W. Klasing is an Attorney, CPA, earned a Master’s Degree in Taxation and has over 20 years of experience with the IRS collections process. He and his staff are well versed in all of the options available to a taxpayer with significant tax debt and have extensive experience in dealing with IRS revenue officers and the Automated Collection Process.
In 2004, the IRS issued a consumer alert warning of Offer in Compromise (OIC) Mills claiming to be able to settle Taxpayer IRS debt for “pennies on the dollar” through the OIC program. These OIC Mills were (and very much still are) quoting the public seemingly affordable prices to prepare an Offer in Compromise. However, they typically were not pre-screening Taxpayers to determine if they were even remotely qualified for the program at the outset and they were preparing the OIC’s improperly, often failing to include the necessary backup documentation with the Taxpayer’s OIC. Moreover, they were failing to negotiate with the IRS on behalf of the taxpayer where necessary.
Recently, IRS Commissioner Mark W. Everson was quoted as stating: “The OIC Program serves an important purpose for a select group of taxpayers. The biggest problem with the OIC program is that unscrupulous OIC promoters have been charging excessive fees to taxpayers who have no chance of ever meeting the program’s requirements,” “We urge taxpayers not to be duped by high-priced promises.”
To this day, largely because of the OIC Mills, the vast majorities of Offer in Compromise applications either are returned as unprocessable or are outright rejected. In 2004, the IRS approved 19,546 offers, which was about 16% of the total number of offers it received. In 2005, the IRS accepted 14,526 out of the 73,301 offers in compromises received which lead to the collection of $290 million out of the underlying $1.9 billion in outstanding tax debt settled through OICs in 2005. Historically, 34% of Offers are accepted and approved by the IRS.
The statistics for offer acceptances during the past several years:
|Received by IRS:||46,000||44,000||52,000||57,000||59,000|
|Accepted by IRS:||12,000||11,000||11,000||14,000||20,000|
Given that historically only about 34% of OICs are accepted, It is a waste of time and money to file for an OIC without using a professional that understands the program and will make an effort to determine how well your particular fact pattern fits into the program at the outset of the engagement and before extensive fees are incurred. To protect yourself, if you do not use the
Tax Law Offices of David W. Klasing to prepare your OIC, make sure you find a tax professional that is experienced, qualified, moral and possess a professional demeanor. You will be working closely with this person for at least the next year or two, so make sure you feel absolutely comfortable with your chosen Tax Professional. Most importantly, make sure the Tax Professional you use does more than just type up the OIC forms and mail them into the IRS. Make sure they attempt to determine if you are a good fit for the OIC program at the outset and thus have a reasonable chance of having your OIC accepted before you commit to using them.
Given the low overall acceptance rate of OIC’s, even the most successful OIC Tax Professionals have lost Offer in Compromise cases. For this reason, in addition to helping our client’s self-accesses if they are a good fit for the program at the outset and thus have a reasonable chance of having their OIC’s accepted, the Tax Law Offices of David W. Klasing always has a backup plan for our clients. For example, if an OIC is rejected for one of our clients, we can request that our client be granted a monthly installment agreement, be classified as currently uncollectible or where circumstances warrant, we can seek bankruptcy protection for our clients.