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What is the Offer in Compromise Success Rate?

IRS Offer in Compromise Success Rate – Acceptance Percentage By Year

What Percentage of Offer in Compromise Submissions are Accepted by the IRS?

Offer in Compromise Success Rate

A commonly used tactic for the relief of IRS tax debt is to make an Offer in Compromise. If you are not familiar with what an Offer in Compromise is, please read our post, “What is an Offer in Compromise?“. Whether you have already submitted an Offer in Compromise and have been waiting to hear back from the IRS (feeling like forever yet?) or you are simply weighing your options of how to proceed with meeting your tax liabilities, you may find yourself asking, “What is the Offer in Compromise acceptance rate?”.

Luckily, the IRS publishes a yearly Data Book jammed full of exciting IRS statistics! “Woooohoooo!” scream the fun-loving children of America. Yes, that is sarcasm, the Data Book is a very boring read, and would be highly effective as a bedtime story. However, it does allow us to answer the question at hand. Please note, these stats are nationwide, the numbers run from Oct.1 to Sept. 30, and the IRS rounds their Offer in Compromise statistics to the nearest thousand.

  • In 2010, there were 57,000 offers of which 14,000 were accepted, a success rate of 24.6%;
  • In 2011, there were 59,000 offers of which 20,000 were accepted, a success rate of 33.9%;
  • In 2012, there were 64,000 offers of which 24,000 were accepted, a success rate of 37.5%;
  • In 2013,  there were 74,000 offers of which 31,000 were accepted, a success rate of 41.9%; and
  • In 2014, the last year for which statistics are currently available, there were 68,000 offers of which 27,000 were accepted, a success rate of 39.7%.

There are a few patterns we can see emerge when we analyze these statistics. The first is that the number of offers submitted goes up year to year until 2014. The second is that the rate of acceptance seems the increase year to year until you get to 2014. however, perhaps the most important pattern, is that the acceptance rate is ALWAYS far less than half. In 2014, 3 of every 5 Offers in Compromise made to the IRS were rejected. Those are people who waited months for an answer just to be disappointed.

Why Would the IRS Reject an Offer in Compromise?

This is no simple answer and there could be more than one reason why any specific Offer in Compromise is rejected. It could be something as simple as making errors on Form 656. It could be because the IRS feels they can easily collect the full amount of the tax liability from the taxpayer. It could be because the taxpayer has not met the requirement of “coming into complete compliance”, which could be due to many factors, such as not filing any of the returns for the past 10 years. Perhaps the IRS Agent in charge of your file feels like they need to make an example of you….

Each tax liability and taxpayer is different, so ever Offer in Compromise has it’s own factors. Many of the offers fail because they had 0% chance of success from the beginning and should never have been made.

How Does a Taxpayer Increase Their Chance of Success with an Offer in Compromise?

Do not believe anyone who tells you that you are guaranteed to succeed on your Offer in Compromise: it is not up to them, it is up to the IRS.

The best way to increase the chance of success for your offer in compromise is to make sure it is part of a complete tax plan which you made with the assistance of a tax professional or tax attorney. here at Glouzgal Ramos Groth LLP, our law firm has a much higher offer acceptance rate than the national average. We won;t share that percentage here because as the Connecticut Bar likes to remind us, “past results are not an indicator of future performance”, and of course, this is an accurate statement.

How Does Glouzgal Ramos Groth LLP Increase the Chance of Offer in Compromise Success?

  • We consult with our clients to make a tax plan and determine if an Offer in Compromise is right for them (there are other options);
  • We make sure our clients actually qualify for an Offer in Compromise;
  • We make sure the tax debt is rightful!!!;
  • We make sure our clients have come into compliance with the IRS;
  • We know what the IRS is looking for and present the Offer in a light most favorable to our client;
  • We provide all details the IRS needs to make a determination, and nothing more, to avoid making unnecessary or additional disclosures;
  • We can appeal unreasonable rejections.

Dealing with the IRS is not something you have to do alone! We are here to offer our knowledge, experience and professional guidance.

 

Offer in Compromise with IRS

What is an Offer in Compromise with the IRS?

Tax Debt Resolution Options

What is an Offer in Compromise?

Making an Offer in Compromise is one of the most well known methods to settling tax debt with the IRS. In case you have never heard of one or don’t know exactly what it is here is the basic scenario:

The IRS contacts you claiming you owe X number of dollars in say, undeclared income tax. You don’t have X dollars, and are currently unemployed, so there is very little chance that you will have X dollars in the foreseeable future. So, you want to offer the IRS Y number of dollars, with Y being some amount less than X. The IRS then has the option of accepting Y number of dollars in complete satisfaction of your tax debt. By filing an Offer in Compromise, you have just saved yourself Z number of dollars (the difference between X and Y).

However, as is often the case with the IRS, things are not that simple.

Why Would the IRS Accept an Offer in Compromise?

While the taxpayer saves money, the government loses money in an Offer in Compromise. So why would the IRS accept such an offer? There are a few reasons why the IRS makes available the Offer in Compromise process.

  • Congress decided that taxpayers deserve a clean start even if they have made mistakes in the past. With one of the requirements of being completely up to date with all your tax returns, Congress figured you deserve a chance to catch up after making sure you are in compliance.
  • Some taxpayers are “judgment proof”. If the IRS leans on you when you are already suffering financially, the only thing they may succeed at is crushing your finances completely. If you don’t have any money at that point, what can they get from you? As the saying goes, you cannot get blood from a stone.
  • There is a cost to enforcement. Taking taxpayers to Court and running audits costs money. It also costs time. In order to save themselves from having to incur the costs of enforcement and wasting the time of their already limited number of agents and attorneys, the IRS is willing to accept tax debt settlements for less.
  • The IRS is buying itself more time. While the Offer in Compromise is under consideration, the statute of limitations (amount of time the IRS has to collect) is tolled (does not expire).
  • Disclosure, disclosure, disclosure! While making the offer or convincing the IRS to accept it, the taxpayer might disclose some other facts the IRS can use against them.

How Does a Taxpayer Make an Offer in Compromise?

The short answer is you fill out IRS Form 656. However, an Offer in Compromise should not be submitted until you have a proper tax plan in place. You NEED to consult a tax professional before filing any documents with the IRS for a number of reasons. The majority of Offers in Compromise are rejected. Working with a tax professional can greatly increase your chance of success, or at least make sure the form is filled out properly.

If you are thinking of making an Offer in Compromise to the IRS or have tax issues that need to be addressed, please contact us to discuss your matter. We have helped multiple clients find tax relief through successful Offers in Compromise, and ar here to help you as well.