If the IRS has rejected your offer in compromise application, don’t give up just yet. You may be able to change their minds through the appeals process. But be ready to act quickly. You only have 30 days to appeal a rejected offer in compromise, and to improve your chances of success, you may want to work with a tax attorney.
At Wiggam Law, we have extensive experience helping individual and business clients secure offers in compromise on the state and federal levels. If that’s not the best program for your situation, we can help you find another option. In the meantime, here’s an overview of how to deal with a rejected offer and tips on what to do if the IRS returns your offer application.
How to Appeal a Rejected Offer in Compromise
You can appeal by filing Form 13711 (Request for Appeal of Offer in Compromise) or by writing a letter with the information on this form. In either case, you must give the appeal to the IRS within 30 days of the date on your rejection letter.
Whether you’re using Form 13711 or a letter, the appeal must include the following:
- Your name, tax ID number, address, and daytime phone number.
- The tax year or periods involved in the offer.
- A copy of your rejection letter.
- A list of items that you disagree with and why.
- Documents to support your claims.
- A written explanation of why you disagree with disputed items, if relevant.
- References to the law that supports your claims.
If you file Form 13711, sign it when you’re done. If you write a letter, include a statement that you want to appeal the rejection, and when you sign the letter, note that you’re signing under perjury.
How to Dispute Items in Your Appeal
If you want to dispute items that were listed in the Income and Expense Table and Assets and Equity Table, start by comparing them to the numbers you listed on your application. Individuals should reference the Form 433-A (OIC) that they submitted, while businesses should look at their Form 433-B (OIC). If you don’t have a copy of your original application, contact the number on the rejection letter.
If the number you submitted differs from the number on the table, note that in your appeal, and then attach a document to support your claim. For example, say that the IRS noted that your income was $1,000 per week, but your application says $500. In your appeal, you note that issue and include a copy of your pay stub.
In many cases, with expenses, the discrepancy is not because the IRS recorded the numbers incorrectly. Instead, it may happen if the agency’s financial standard is significantly lower than the amount you noted on your application. In this case, you can still dispute the item and provide supporting documentation, but you also need to explain why the IRS should accept a number that is higher than the national standard. For example, your out-of-pocket healthcare expenses may be higher than the allowed amount due to having an illness.
Discrepancies may also happen when you’re dealing with the fair market value of certain assets. The IRS generally expects you to include the available equity in your assets, and it typically uses 80% of the asset’s current fair market value (also known as the quick sale value) minus what you owe. If the IRS believes that you have undervalued your assets, you can appeal that by providing details about comps, appraisals, or other info that supports your estimation of the property’s fair market value.
You can also appeal special considerations. When you applied for the offer, you should have included special considerations in section three of Form 565-B. In that section, you note if you are experiencing economic hardship or if you want the IRS to consider public policy or equity when reviewing your application. Then, you write a letter explaining the situation. If you didn’t do this in your original application or if you didn’t do this thoroughly enough, you can appeal to share your considerations.
Form 13711 provides lines where you list the disputed item, and next to that, you write out your reason for disagreement. If you write a letter, you can just list the disputed items and provide an explanation. Then, you can attach the supporting documents to the form or letter.
Where to send your appeal
Send your appeal request to the address noted on your rejection letter.
Points to Consider When Appealing Your Rejected Offer
The IRS rejects just over half of all offer in compromise applications, and if you want to make the most of your appeal, you need to avoid the mistakes you made in the original application. If you completed the application on your own or if you worked with an inexperienced company, you may want to work with a tax attorney for the second round.
An experienced tax attorney can review your original application and rejection letter and discuss your situation with you. They’ll be able to identify why the offer was rejected and rectify the situation. If you have special considerations, they know what the IRS wants to hear and which of the corresponding tax laws is the best to cite.
In cases where the rejection was legitimate, a tax attorney may be able to suggest modifications to your current situation that help you get approved. If the attorney believes that you are not a good candidate for this program, they can help you explore alternatives such as currently not collectible status, partial payment installment agreements, etc. An experienced tax attorney can also ensure that you have fully optimized your options in terms of penalty relief and other forgiveness strategies.
What to Expect During the Appeals Process
In the appeals process, you’ll get connected with an IRS employee who generally has more experience than the offer examiner that you worked with during the application process. However, although they have more knowledge about the tax code, they are always going to start the process with the assumption that the offer specialist’s information is correct.
Your job is to convince the appeals employee to accept your position. If you do that successfully, they should be able to get the offer approved. However, this is easier said than done, and it can be complicated when you’re dealing with nuanced info and special considerations.
If you provide information that is significantly different from what was originally provided, the appeals officer may send that information to the offer examiner for review. Then, they will consider the examiner’s opinion and share the examiner’s feedback with you. At that point, you have the option to provide more supporting documents or arguments.
You can represent yourself during an appeal, but you should consider representation from an enrolled agent, CPA, or tax attorney for best results. Those are the three professionals who can represent you in front of the IRS.
If you disagree with the appeal’s result, you may be able to take the issue to Tax Court if you have already filed a Collection Due Process Hearing Request, but you must have a solid argument. You cannot appeal or take issues to Tax Court if your only point is that you can’t afford the tax bill. You must support that argument.
Frivolous Offers
The IRS will reject frivolous offers, and you may also face a $5,000 penalty. Frivolous offers include applications with positions that the IRS has already rejected and OIC applications submitted to delay the tax collection process.
What If Your Offer Is Returned?
A returned offer is when the IRS sends back your application without reviewing it. That is not the same as a rejection, and if that happens, you don’t have to appeal. Instead, you just need to address the reason for the return and resubmit your application.
However, you should take this opportunity to ensure that you have the best possible application. If you worked with a big tax relief firm and your offer was returned, that’s a red flag that the company didn’t complete the application correctly and may lack the experience you need to be successful. In situations like that, consider working with a tax attorney.
The main reasons for a returned offer include issues that make you ineligible for an offer, such as being in a current bankruptcy case or incurring new tax debt while the application was pending. Other issues are related to not completing the application thoroughly, such as not including the fee, not filling out the full application, or failing to include supporting documents.
If you made a small mistake, such as not attaching a document, you can just add it to the application and send it back to the IRS. However, if a more substantive issue is at play, you may want to reach out to a more experienced tax attorney.
Get Help With Offers in Compromise Today
At Wiggam Law, we work closely with our clients to help them resolve their tax debts sustainably and efficiently. If you have had an offer rejected, contact us. We’ll help you decide the best steps forward, whether that involves improving your application, taking a new approach, or looking into other relief programs. Call us at (404) 233-9800 or fill out our online consultation form to schedule a meeting with one of our tax attorneys today.