You hear a lot about Offers In Compromise (OIC). Mostly what is being discussed is an OIC based on Doubt as to Collectability. That means that the client is proving he can’t pay and is offering the IRS a settlement of what he can.
There are two other types of Offers:
Doubt as to Liability (DATL)
DATL is based on some doubt that the money is really owed.
Offer and Effective Tax Administration (ETA)
ETA is based on hardship or other factors. While the taxpayer COULD pay, he or she should be allowed to not pay due to extenuating circumstances. This case relates to an Effective Tax Administration offer that we lost. Unfortunately, the taxpayer was already past the deadline for filing a CDP appeal. Had he recognized the importance of the letter titled “Form 1058, Final Notice of Intent To Levy and Your Rights to a Hearing”, he would have had a better chance, because the case could have had the ability to be submitted with the threat of Tax Court review. As you will see, that would have been a nice thing to have in our corner! By the time we got involved it was too late for that, but we felt the circumstances warranted an Offer based on Hardship. The circumstances in this case were pretty dire. The client had a terminal illness with only a few years remaining to live. His only asset was his house, and he had equity in the house that could reduce the debt significantly. He had an income stream, but the IRS was going to levy it. He wouldn’t be able to pay the mortgage and continue living in the house if the IRS seized his income.
We asked if the IRS would accept a settlement and let him keep living in his house until he passed. The IRS said no.
We appealed. Appeals said no.
We asked for the manager. No.
We asked for the manager’s manager. No.
We asked for the manager’s manager’s manager. No.
We went all the way up the chain to the attorneys in Washington D.C.
They determined that if he sold his house and moved into a cheap apartment he could afford to live off social security until he passed. No was the final word. This case could have had a completely different attitude and outcome if we had the threat of taking them to court in our back pocket. But, due to client not being aware of the process, he missed the all-important CDP appeal deadline that starts with the Letter 1058. The Letter 1058 is the final notice of your ability to have an appeal with the power of Tax Court review. We didn’t have that opportunity. It leaves me scratching my head and wondering what the IRS deems as hardship. Only time and the court will tell! Feel free to look on the web, or check us out on Facebook to read more about our company and some of the different solutions that are available for Offer in Compromise. Or call for an appointment and let us help you. Let’s get started today! 303-753-6040 Ext 395