Granting IRS OIC Relief
Acceptable Grounds for IRS Granting of Offer-in-Compromise Relief
The IRS may accept an Offer-in-Compromise based on three grounds:
- Doubt as to collectability
- Doubt as to liability
- Exceptional circumstances.
At the Law Offices of Neil Crane, LLC, our attorneys can help you determine if you are eligible for a Granting IRS OIC Relief and whether you have adequate grounds for requesting such an offer.
Doubt as to Collectability
Granted applications for State or Federal tax forgiveness under an Offer-in-Compromise is based on a well-founded offer with strong documentation to prove balance sheet values on available assets and proper income calculations. Failure to understand or validly met these IRS or DRS standards creates an offer that may be viewed as unreasonable or dead-on-arrival.
Doubt as to collectability means that the taxpayer could never pay the full tax within the statutory period for collection. To determine doubt as to collectability, the offer must be based upon net realizable asset values plus monthly disposable income over the statutory collection period. The proper calculation of a total offer amount must contemplate both criteria and provide documented proof that the taxpayer’s offer properly reflects the collectability of assets and income as of the statutory collection period. Any offer that does not properly reflect an acceptable calculation of both components will result in denial of the Offer-in-Compromise. This causes a serious delay and an overwhelming setback to a taxpayer’s future attempt to resolve their tax debt through a later submitted Offer-in-Compromise.
Doubt as to Liability
This means that there is a legitimate question about the substantive correctness of outstanding assessed liability. A reasonable doubt may exist in the proper calculation of the assessed tax as a result of a legal mis-assessment for the failure to consider evidence of non-liability as produced by the taxpayer or the existence of new evidence pertaining to the existence of true taxpayer liability. Doubt as to liability is truly an accounting and legal determination that is always fact-specific. It requires full due diligence and true working knowledge of the latest applicable tax law and legal decisions.
Exceptional Circumstances: Effective Tax Administration
In certain unique situations, the IRS may grant taxpayer relief despite the fact that the tax debt is correct and the taxpayer does have collection potential. This allows the taxpayer to compromise on the valid tax debt that is potentially collectible from assets that the IRS will allow the taxpayer to retain due to exceptional circumstances. To qualify for this type of extraordinary relief, the taxpayer or their qualified representative must prove that:
- Collection of the tax would create an economic hardship; or
- Collection of the tax would be unfair; or
- Collection of the tax would be inequitable
Proving that collectible tax debts should not be collectible from existing assets requires unique, factual circumstances and strong taxpayer advocacy in order to prove that the compromise is proper for the purpose of effective tax administration. These circumstances often require proof of physical or psychological impairment. Advanced age may also be grounds for granting Offer-in-Compromise relief for special circumstances.
Proper applications for forgiveness under exceptional circumstances need legal precedent and a well-founded legal argument.
To speak with a lawyer about whether you have adequate grounds to request relief from the IRS through an Offer-in-Compromise, schedule your free initial consultation with the Law Offices of Neil Crane, LLC. Contact us online or call us at 203-230-2233. We have office locations in Hamden, Bridgeport, Ridgefield, Waterbury, New Haven and Rocky Hill, Connecticut.
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