Offers in Compromise Strategies: Using OICs to Challenge Assessments and Request Reconsideration of Tax Bills

The OIC program is one of the most misunderstood of all IRS taxpayer initiatives. For most practitioners, their exposure to the OIC program is limited to circumstances where a taxpayer has difficulty paying a tax bill due to financial hardship. There are, however, other grounds which a taxpayer may utilize in submitting an OIC, which may be less dependent on the taxpayer’s financial situation and may have a greater chance of success.

In circumstances where a taxpayer is facing a tax assessment over which there is a dispute as to the accuracy of the liability, the taxpayer may file a DATL. An offer filed under DATL carries some limitations: taxpayers may not combine a DATL with any other basis for an OIC.

However, a DATL can offer some significant advantages for taxpayers facing a disputed tax bill. Unlike other OIC requests, taxpayers filing a DATL do not have to make a financial disclosure. A DATL filing also preserves the right of the taxpayer to contest the merits of the assessment. The Service generally treats DATL filings as similar to an audit reconsideration, so practitioners should be prepared to summarize the basis for any liability challenge in filing the Form 656-L.

Tax advisers may also file an OIC based on the argument that a compromise would promote effective tax administration (ETA). This provides more of a “catch-all” reasoning based on an equity argument. This approach, however, generally requires asset and income disclosure, as well as being the last course the IRS may review.

Listen as our experienced panel provides a thorough and practical guide to the OIC program, from selecting a strategy through required filings, to minimize tax exposure.

1. Bases for OIC available to taxpayer
   1. OIC-Doubt as to Collectibility (DATC)
   2. OIC-Effective Tax Administration (ETA)
   3. OIC-Doubt as to Liability (DATL)
2. DATL criteria
3. DATL standards of review
4. OIC strategies
5. Filing and documentation requirements

The panel will discuss these and other important topics:

• In what types of tax disputes may a taxpayer use an OIC DATL to try to get reconsidered?
• Reporting mechanics for a DATL
• What are the standards for an OIC citing ETA as grounds for a compromise amount?
• IRS standard of review for DATL filings

Learning Objectives

After completing this course, you will be able to:

• List the bases on which a taxpayer may submit an OIC
• Identify the circumstances under which a taxpayer may claim a DATL
• Recognize the standards for filing an OIC under a claim of ETA
• Discern the filing and documentation requirements that must accompany a Form 656-L OIC-DATL
• Decide on strategies for preserving taxpayer rights to challenge assessments using a DATL

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite: Three years+ business or public firm experience at mid-level within the organization, preparing complex tax forms and schedules; supervisory authority over other preparers/accountants. Knowledge and understanding of IRS audit procedures, the IRS Appeals Process, Audit Reconsideration Requests and responding to Information Document Requests from the IRS.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).