Offer in Compromise Guides

Why Would an OIC (Offer in Compromise) Be Denied?

Do you know paying a tax bill in full will be almost impossible? The Internal Revenue Service might be willing to settle for less than the full amount with an offer in compromise. However, you should find the answer to the question, “Why would an OIC be denied?” before considering this option.

If, for example, you provide incomplete documentation when submitting an OIC application, it could be denied. You should, therefore, double- and triple-check to ensure you provide the IRS with the necessary information when completing an OIC application.

There are also other reasons why an OIC might be denied. Find out more about them below.

The IRS Believes You Have The Ability To Pay a Tax Bill

Unfortunately, the IRS doesn’t approve OIC applications and eliminate people’s tax troubles out of the kindness of its heart. Instead, it usually agrees to tax bill settlements when it knows taxpayers cannot meet their tax obligations.

The agency approves some OIC applications because it knows certain taxpayers might not pay the IRS anything otherwise. These taxpayers have shown the IRS that their income won’t enable them to pay the full amount of their taxes anytime soon.

If the IRS looks through your financial records and determines you have the ability to pay your taxes, this is often the top answer to the question, “Why would an OIC be denied?” The IRS will give you no choice but to meet tax compliance requirements by paying the full amount you owe.

The IRS Feels You Submitted an Insufficient Offer Amount

The IRS is sometimes willing to negotiate a little when settling tax bills with American taxpayers. However, the agency isn’t traditionally in the business of allowing people to pay pennies on the dollar when settling tax debts. This would lead to the IRS generating significantly less tax revenue than it does now.

Sending an insufficient offer amount is another common answer to the question, “Why would an OIC be denied?” This should encourage those thinking about submitting OIC applications to make a strong settlement offer to the IRS.

Trying to shortchange the IRS will typically lead to your OIC application being denied. It could also leave you without a leg to stand on if you challenge the IRS during the OIC rejection appeal process.

The IRS Knows the Public Policy Concerns It Could Cause

If the IRS approved OIC applications from too many taxpayers, it would set a terrible precedent for the agency and the country’s tax laws. Many taxpayers would submit OIC applications just to see if the IRS was willing to throw them a bone.

The IRS is aware of the public policy concerns this could raise, which explains why it often errs on the side of caution by denying many OIC applications. To have an OIC application approved, you need to show the IRS that you must settle a tax bill to have any chance of paying even a portion of it.

Allow Us To Assist You With Submitting an Offer in Compromise Application to the IRS

Submitting an offer-in-compromise application to the IRS is smart if you’re struggling to figure out how to pay off a tax bill. Just ensure you know the answers to the question, “Why would an OIC be denied?” before submitting one.

Consider calling on a trusted tax consultant from Levy & Associates to help with your application, too. We can discuss your options when you cannot meet your tax obligations.

Touch base with us by calling 313-447-1704 today or complete this brief form to set up a consultation with a tax professional.

Contact Levy & Associates for Dependable Tax Audit Services

Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.

There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.