Case Study – IRS Defense Services: Offer in Compromise

Challenge/Situation

A couple who owned a large local business was audited by the IRS, which uncovered a large sum of unreported income. Eventually, that amount accrued to a $1.4 million tax liability.

Generally speaking, the IRS can’t accept a settlement offer if the taxpayer in question can afford to pay what they owe. In this case, the couple did not possess the means to meet their full payment obligation. They turned to Goldin Peiser & Peiser for help.

Our Approach/Solution

Our IRS Representation and Defense team is led by Sidney Goldin, CPA, a former IRS Revenue Agent. Sidney and the team first met with the couple and worked to understand all aspects of their situation and circumstances. Our findings led us to determine that they qualified for an Offer in Compromise (OIC), and we immediately filed for it.

An OIC is an agreement between a taxpayer and the IRS that settles a taxpayer's tax liabilities for less than the full amount owed.

The IRS may accept an OIC based on one of three scenarios:

  • If doubt exists as to liability, or a genuine dispute as to the existence or amount of the correct tax debt under the law.
  • If doubt exists as to collectability. This generally comes into play in cases where a taxpayer's assets and income are less than the full amount of the tax liability.
  • When no doubt exists that the tax in question is legally owed and the full amount owed can be collected—but owing to exceptional circumstances, payment in full would create an economic hardship or be unfair and inequitable.

Filing an OIC, and seeing it through to resolution, can be a timely and extremely challenging process. In considering an OIC, the IRS examines a taxpayer's unique circumstances, including things like income, expenses, assets under ownership and ability to pay. Specifically, our process for pursuing an OIC begins by meeting with the client, preparing financial statements and supporting documentation, and submitting it for consideration by the IRS. Based on the information we submit, the IRS considers the case and renders its decision.

Clients and their representatives may think they meet the criteria for an OIC. The IRS, however, may disagree, which would result in its rejection of the OIC filing. This was precisely the initial outcome of our client’s OIC filing.

Results

Based on the IRS’ initial rejection of the OIC, we undertook intensive appeal efforts, which occurred over a nearly two-year period. Sidney and the IRS Representation and Defense team persevered, and through skill, negotiation and willpower, they ultimately settled the case with the IRS for $183,000—that’s 13 cents to the dollar, or 13% of the original amount owed.


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