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Valor Tax Relief Team
Professional Tax Resolution Specialists
Introduction
Receiving a denial for your Offer in Compromise (OIC) can feel like a major setback, but it doesn't have to be the end of your tax debt resolution journey. The IRS denial is often just the beginning of a process that can still lead to significant relief.
You have two primary paths forward: appeal the decision within 30 days, or reapply with a stronger case. Understanding the difference between these options and knowing how to strengthen your position can make the difference between continued financial stress and achieving the settlement you need.
Understanding OIC Denials
Not all OIC rejections are created equal. The IRS uses specific terminology that determines your available options and next steps.
Returned Offers
- Procedural issues (missing fee, incomplete documentation)
- No appeal allowed
- Must fix issues and resubmit
Rejected Offers
- IRS reviewed but denied your offer
- Appeal possible within 30 days
- Can also reapply with changes
Common Reasons for Rejection
- Offer amount below your Reasonable Collection Potential (RCP)
- Incomplete or inaccurate financial disclosures
- Not current with tax filings or estimated payments
- IRS believes your future income allows higher payments
Your Right to Appeal
If your offer was rejected (not returned), you have 30 days to file an appeal. This can be your fastest route to reversing a denial without starting over completely.
Critical Timeline
30 days from rejection letter - This deadline is non-negotiable. Missing it means you must file a completely new OIC application.
Appeal Requirements
- Form 13711 or formal written protest
- Copy of rejection letter
- Specific items you disagree with
- Supporting documentation
- Signed statement under penalty of perjury
Appeal Benefits
- Collection actions paused during appeal
- Independent Appeals Officer review
- Possible counter-offer negotiations
- Written decision on outcome
Reapplication Strategy
You can reapply for an OIC at any time, but the IRS expects meaningful changes in your financial circumstances or offer amount. Simply resubmitting the same offer will likely result in immediate rejection as frivolous.
When Reapplication Makes Sense
- Significant income reduction or job loss
- Asset depreciation (property values, investments)
- New medical expenses or financial hardship
- Resolved compliance issues (filed returns, current payments)
- Approaching statute of limitations
Required Documentation
- New Form 656 (Offer in Compromise)
- Updated Form 433-A (individuals) or 433-B (businesses)
- $205 application fee (unless waived)
- Initial payment for chosen option
- All tax returns filed and current
Improving Your Offer
- Offer closer to your RCP calculation
- Provide complete, accurate financial information
- Document any hardship circumstances
- Address previous rejection reasons
Strengthening Your Case
Whether appealing or reapplying, your success depends on presenting a stronger case than your initial submission. Focus on addressing the specific reasons for your denial.
Financial Documentation
- Recent bank statements (3-6 months)
- Pay stubs and income verification
- Asset appraisals and valuations
- Expense documentation
Hardship Evidence
- Medical bills and treatment records
- Job loss documentation
- Disability or reduced income proof
- Dependent care expenses
Compliance Status
- All tax returns filed
- Current on estimated payments
- No new tax liabilities
- Proper record keeping
Alternative Solutions
If an OIC isn't viable for your situation, several other IRS programs may provide the relief you need. Each has different eligibility requirements and benefits.
Payment Options
- Installment Agreements: Monthly payment plans
- Currently Not Collectible: Temporary collection suspension
- Penalty Abatement: Remove or reduce penalties
Special Circumstances
- Innocent Spouse Relief: Relief from spouse's tax debt
- Bankruptcy: Discharge certain tax debts
- Statute of Limitations: Wait for collection period to expire
Frequently Asked Questions
How many times can I apply for an offer in compromise?
You can submit multiple OIC applications, but each new submission should demonstrate meaningful changes in your financial situation or offer amount. Simply resubmitting the same offer without modifications will likely result in immediate rejection as frivolous.
How likely is the IRS to accept an offer in compromise?
The IRS accepts fewer than half of all OIC applications. Success typically occurs when your offer reasonably reflects your ability to pay, is supported by complete financial disclosure, and includes compelling hardship evidence. Proper documentation and professional guidance significantly improve your chances.
What is the IRS Fresh Start Program?
The IRS Fresh Start Program provides expanded tax relief options, including more flexible installment agreements and enhanced offers in compromise opportunities. It's designed to help struggling taxpayers resolve their debts more easily through streamlined processes and relaxed requirements.
What does the IRS look at for an offer in compromise?
The IRS evaluates your Reasonable Collection Potential (RCP) by thoroughly reviewing your income, expenses, assets, and ability to pay. They assess whether your offer represents the maximum amount they can reasonably collect, considering your current financial circumstances and future earning potential.
Can I appeal a returned offer in compromise?
No, returned offers cannot be appealed because they were never formally evaluated. Returned offers are rejected due to procedural issues like missing fees or incomplete documentation. You must fix these issues and submit a completely new application.
What happens if I miss the 30-day appeal deadline?
If you miss the 30-day deadline for appealing a rejected OIC, you lose your right to appeal that specific decision. However, you can still reapply with a new offer at any time, provided you demonstrate meaningful changes in your financial circumstances or offer amount.
Should I hire a tax professional for my OIC reapplication?
While you can handle an OIC reapplication yourself, professional guidance significantly improves your chances of success. Tax professionals understand IRS requirements, can help strengthen your case, and ensure all documentation is complete and accurate.
Conclusion
An OIC denial doesn't mean the end of your tax debt resolution options. Whether you choose to appeal within 30 days or reapply with a stronger case, success depends on understanding the IRS's concerns and addressing them directly.
The key is presenting complete, accurate financial information and demonstrating that your offer represents the most the IRS can reasonably collect. If an OIC isn't viable, alternative programs like installment agreements or currently not collectible status may provide the relief you need.
Need Help with Your OIC Reapplication?
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