If you watch too much late-night cable television, you probably have seen commercials that make it appear that paying federal taxes is no big deal, because you can always work out a "pennies on the dollar" deal. Don't count on it.
Peter Pappas reports on a recent Tax Court case upholding the IRS denial of an Offer in Compromise, even though the taxpayer offer was for more than the IRS thought she could pay:
The Court noted the IRS based it’s denial of the taxpayer’s offer in part on the taxpayer’s historically poor record of compliance with the tax laws.
If a poor record of compliance with the federal tax laws is reason enough to reject an otherwise reasonable Offer, the IRS can reject anyone’s Offer at any time. If you are filing an Offer in Compromise, by definition, it is because you have not complied with the federal tax laws.
Mr. Pappas points out that trying to get a "pennies on the dollar" deal has real risks:
I regularly tell my clients that Offers in Compromise based on doubt as to collectibility are a crap shoot. You can meet all of the suggested requirements and the IRS can still legally reject your Offer merely because it feels it’s not in it’s best interests.
Of course, by the time you find out that the Offer is not in the government’s best interest you have voluntarily given it all of the information it needs to seize your assets and have also given them at least an additional year (the filing of an Offer extends the statute of limitations) to collect the tax.
Roni Deutch, an attorney who handles a lot of compromise offers, is fed up with the way the IRS is handling them.
The items included in the Tax Update Blog are informational only and are not meant as tax advice. Consult with your tax advisor to determine how any item applies to your situation.
Joe Kristan writes the Tax Update items, and any opinions expressed or implied are not necessarily shared by anyone else at Roth & Company, P.C. Address questions or comments on Tax Updates to