When does it make sense to hire a tax attorney to negotiate an IRS Offer in Compromise?

An IRS offer in compromise is the form of debt settlement that the IRS uses. As with any kind of debt settlement, most people can handle the negotiations on their own without the help of an attorney. However, there are some occasions where an attorney is not only useful, but invaluable in assisting you with your offer in compromise negotiation.

Reasons for Tax Debt

One factor that the IRS uses when evaluating your offer in compromise is the reason for all of the money owed. In situations where you failed to file your taxes or were evading taxes, the IRS is less likely to favorably consider your offer in compromise. In fact, one of the requirements to even submit an offer in compromise is that all of you tax documents are properly filed and brought up to date. An attorney can aid in reinforcing your current financial situation to the IRS and typically has more effective lines of communication with IRS agents.

Underlying Circumstances

The IRS acknowledges that unexpected health and life events can make paying tax debt difficult to impossible. However, they must still be thorough in their investigation before agreeing to your offer in compromise. The IRS may need to contact you over the phone and may need medical records or other forms of official paperwork. Handling a negotiating on top of everything else could be too much. This is where an attorney can really be a great asset. The attorney can clarify that all communications go directly through their office and can handle the paperwork and formalities for you, removing much of the stress and work so that you can focus on getting well.

Non-Expedited Offers in Compromise

If your offer in compromise does not fall under the expedited requirements, meaning that the amount is over $50,000 or you make more than $100,000 annually, an attorney is essential to ensuring a timely acceptance of your offer. Remember that under IRS rules, the IRS has up to two years to accept or reject your offer in compromise. This means that after completely paying your offered amount, the IRS may still reject the offer and charge you the entire accumulated interest and fines. An attorney can contact the local IRS agents directly and ensure that your offer is accepted in a timely manner.

Appeals

If your offer in compromise is rejected, you have the right to appeal to the tax court. As with any court of appeals, this appeal must be handled by an attorney. An attorney can file your appeal document within the required time period and will attend your tax hearing and advocate for you. They will present the steps that you have already taken and can be extremely beneficial in persuading the tax court to consider your arguments.

Case Studies: When to Hire a Tax Attorney for IRS Offer in Compromise Negotiation

Case Study 1: Communication & Tax Debt

John, facing substantial tax debt due to failure to file taxes, hired an attorney. The attorney effectively communicated John’s financial situation to the IRS, improving the negotiation process and increasing the likelihood of a favorable offer in compromise.

Case Study 2: Handling Underlying Circumstances 

Sarah encountered unforeseen health and life events that hindered her ability to pay tax debt. Hiring an attorney relieved Sarah’s burden as they managed negotiations, paperwork, and official communication on her behalf, allowing her to focus on recovery while ensuring a smooth offer in compromise process.

Case Study 3: Non-Expedited Offers 

Mark’s offer in compromise exceeded expedited requirements, making it essential to hire an attorney. By directly contacting local IRS agents, the attorney ensured a timely acceptance of Mark’s offer, preventing potential rejection and the accumulation of interest and fines.

Case Study 4: Appeals to Tax Court

When John’s offer in compromise was rejected, he exercised his right to appeal to the tax court. With the assistance of an attorney, John met the required deadlines, submitted the necessary documents, and presented compelling arguments during the tax hearing, maximizing his chances of a successful appeal.