How to Appeal an Offer in Compromise Rejection

Allison Blackham
Expert Contributor
Last Updated:
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  • Before you appeal an offer in compromise, make sure to check whether your offer was rejected or returned.
  • File the appeal within 30 days of receiving the rejection letter.
  • Include all information required to avoid another rejection.

An offer in compromise is an allowance made by the IRS to settle your tax debt for a lower amount than you owe. However, if you have requested an offer in compromise and that request has been rejected, you may be looking at your option to appeal the rejection. The IRS includes several factors in its review of all appeals, so make sure to include all the necessary details and information to increase your odds of having the rejection overturned.

Understanding an Offer in Compromise

When a taxpayer is unable to pay the full amount of taxes they owe, or when paying that full amount would create a significant financial hardship, the IRS may grant them an allowance to pay a lesser amount. The factors considered when reviewing an offer in compromise request include the following:

  • Your ability to pay
  • The value of your assets
  • Your income
  • Your current expenses

The IRS will often approve an offer in compromise request when the amount being offered is the most the IRS could expect to collect in a reasonable amount of time. Before you submit a request, you should explore all other payment options. Certain criteria may also restrict you from being eligible for this option, including if you are in a bankruptcy proceeding that is currently open. Make sure to review all the pre-qualifying information for this option before you make the decision to submit a request.

If you decide to move forward with submitting an offer in compromise, you will need to complete all required paperwork and submit the application fee and initial payment for each form. You must also determine whether you wish to pay in a lump sum or over a period of time.

In the event that your offer in compromise is accepted by the IRS, you will need to pay according to the terms laid out. If your offer is rejected, you can determine whether you plan to appeal the rejection.

How to Appeal an Offer in Compromise Rejection

Should You Appeal?

it isn’t always clear whether you should request an appeal if your offer in compromise is rejected. The IRS has an online self-help tool that can determine whether an appeal might grant you a different outcome. In order to qualify for an appeal, you must start the process within 30 days of receiving the rejection letter.

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Returned vs. Rejected Offer

Before you decide whether to appeal the decision, make sure you understand whether your request was returned or rejected. The distinction is important.  A rejected offer in compromise would be eligible for the appeal process, but a returned offer is not eligible. If it is returned due to having incorrect information, you can resubmit the request after you have made any necessary corrections. A returned request will not count against your tax record. Your request could be returned for several reasons:

  • Failure to pay the application fee
  • Failure to respond to a request from the IRS to provide further information within 14 days
  • Involvement in an open bankruptcy proceeding
  • Failure to remain compliant with filing or payment terms, such as failure to pay estimated payments, un-filed tax returns, or failure to have correct withholdings
  • Failure to keep up with the periodic payments
  • Submission of a similar offer
  • The offer was deemed to be frivolous or made to delay collections

If your offer in compromise is rejected, the letter you receive will note the rejection as well as the reason. In the event that your letter doesn’t include a reason for the rejection, you can contact the person who sent the letter to request that information. Common reasons include the following:

  • The offer is too low
  • The IRS believes that you are able to pay the full amount
  • Your living expenses are high or you live beyond your means

Using the IRS Self-Help Tool

The IRS self-help tool is designed for the individual who originally submitted the request for an offer in compromise. This individual should be a W-2 wage earner, should not be self-employed, and should not own any rental property.

When using the self-help tool, make sure to have your rejection letter available, along with the worksheets that should have been included. If you didn’t receive the income/expense table and asset/equity table, contact the person from whom the letter came to receive these documents. You will also need to have IRS Form 656 (Offer in Compromise) and Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) available.

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Methods to Appeal

After you have used the self-help tool and determined that you do want to appeal the rejection, you have two options. The first is to fill out IRS Form 13711, which is the Request for Appeal of Offer in Compromise. You will send that completed form to the address listed in the rejection letter you received. If an accountant or another tax professional will sign that form, make sure to include a completed Form 2848 (Power of Attorney and Declaration of Representative) with the appeal form, as well.

The second option is to write a letter to the IRS. In this letter, you will need to state your intent to appeal the rejection and include all required information:

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  • Your name, address, and phone number
  • Your Social Security number
  • The reasons you disagree with the rejection
  • A copy of the rejection letter
  • Facts and documentation that support your reasons for disagreement
  • All tax years that relate to the tax debt for which you submitted the offer in compromise

Complete your letter with a statement that all information presented is “true under penalties of perjury.” Then you should sign the letter and send it to the address listed on your rejection letter.

Make a Larger Offer

If your offer was rejected because of the amount offered, you can also respond to the IRS with a larger offer. In order to do so, you will need to submit the paperwork you filed for the original request, along with a statement of the increased offer you are willing to make.

If you need help submitting the paperwork for an offer in compromise or figuring out how to pay an owed amount to the IRS, Solvable can help. We offer tax debt relief options and solutions that can reduce your stress and help you resolve your financial concerns.

 

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Allison Blackham
Expert Contributor
Last Updated: