OIC

1. Actual expenses

Don’t prepare your Offer in Compromise based only on your actual expenses and leave it at that. You have to know when the IRS won’t allow expenses over their maximum and when they will. If you are arguing actual expenses,they have to be fully documented and you have to provide reason why expense over the standard is necessary. Understand what the IRS considers “necessary.” The result could be that you were never eligible for an offer, or it had no chance of acceptance because you didn’t understand the rules. Additionally, you want to use the IRS Standards (IRM 5.8.5.20 Allowable Expenses) to your advantage when it is more beneficial than using actual expenses.

2. Legitimately reduce equity positions

Take advantage of ways to exclude or reduce equity in assets. Don’t over value your assets. Make sure you claim the additional allowable deductions on the offer for vehicles of certain age and mileage (there is one for decreasing vehicle equity and increasing vehicle operating costs). Research the limitations on withdrawing funds from your retirement account or taking loans, or converting equity in savings into an arms-length future stream of income that won’t be considered a dissipated asset.

3. Use the Collection Statute Expiration Date (CSED) to your advantage

Use the IRS statute of limitations (CSED)  as leverage even if you have a decent ability to pay the liability. If the liability is about to expire, the IRS may consider granting an Offer in Compromise (OIC) instead of gambling on if they will collect the full amount though an Installment Agreement.

4. Get ready for appeal if you are rejected

If your Offer in Compromise is rejected, obtain the income, expense and asset tables the Offer Examiner prepared. You can usually find something incorrect that is arguable or you can at least ensure they have the right figures. Provide further arguments at that stage if possible. It may be the difference between an acceptance or going to appeal. Plus if the OIC isn’t accepted you can still get an alternative resolution through appeal.

Conclusion: Prepare an Offer in Compromise with caution.

Getting the optimal Offer in Compromise approved is both a science and an art. These Offer in Compromise tips are only a very basic outlines and there are certainly more tricks of the trade.