Successful Offer-in-Compromise

Overview:
Taxpayer engaged our services to review her installment payment plan, and whether she would qualify to resolve her IRS balances of $85,000 via an Offer in Compromise. Her tax debts stemmed from the non-reporting of gambling winnings – which were assessed by the IRS Automated Under Reporter (AUR) correspondence audit department.

Offer in Compromise Strategy:
Our initial financial analysis determined that her reasonable collection potential was $20,000 based on her income and asset component. She couldn’t afford either settling with a lump-sum plan or short-term deferral plan spread over 24 months.

Some background - she had limited sources of income (Social Security, small pension), a mortgage and surmounting medical expenses due to poor and declining health. As required in payment plans and OIC cases, we advised the client to comply by timely filing her annual tax returns and to avoid the trouble she got into by curtailing her gambling habits.

We reviewed again the possibility, this time under her undue hardship (financial and health). With the only equitable asset she possessed, we recommended she obtain a certified appraisal of her home, several contractor bids to determine the extent of repairs to it, and a realtor’s assessment of its marketable value.

In presenting the OIC- ETA case to the IRS ($1,300 Offer), was rejected due to the equity exceeding our recommended proposal. We appealed their decision, and upon dealing with the OIC Examiner, argued over this issue. IRS was using a combination of online values from Zillow and Trulia. We convinced the Examiner to not to rely on the online photos of the Taxpayer’s home, but to compare the certified appraisal and contractor’s assessments that would cost to fix her home. In the end, IRS OIC Management concurred that our proposed Offer merited her ability to resolve the tax liabilities in her doubt as to collectability.

Outcome:
The IRS Appeals countered and settled for $5,000 – reflecting 6% of the tax debt. From inception to acceptance, this case took about 9 months. The client borrowed the funds from a trusted friend and cleared her balance within a month.

Takeaway:
When looking for tax resolution, consider special circumstances that may work.

Next Story – stay tuned! How a $6.2 million IRS tax debt we settled for $100 (this taxpayer made his state’s top tax scofflaw list)

Successful OIC case with Special Circumstances (Effective Tax Administration)

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