Bob Jablonsky & Associates Blog

The Offer In Compromise – Doubt As to Liability – When You Don’t Owe the IRS and They Say You Do!

by | Jul 5, 2023

What if the IRS says you owe the government, but you really don’t.  I see this more often than you would think.  Believe it or not, this happens all the time.  Here’d an example right from the IRS’s own guides –

Example 1: You were audited by the IRS. When this happened, you moved and did not get the notification, or you suffered a disaster (such as books and records were destroyed in a fire or other natural disaster) causing you to miss the meeting with the auditor. The IRS disallowed all expenses and now you have a tax debt.

The problem tends to get made worse, because once the tax is assessed and the government says you owe it, you are being contacted by the collections group.  If you call the number on the notices you receive, while the IRS employees can help you set up a payment plan or take another action to pay your tax debt, they have no ability to address a tax amount that is incorrect. 

Where do you go and what do you do?  There are several ways you can address it.  The most common method at that point is to request Audit Reconsideration.  However, Audit Reconsideration is at the discretion of the IRS.  What if they refuse to review your issue in Audit Reconsideration?  One other option is to file an Offer In Compromise – Doubt as to Liability (OIC-DATL).

The Offers In Compromise 

There are generally considered to be four types of Offers In Compromise:

  1. Offer In Compromise – Doubt as to Collectability
  2. Offers In Compromise – Doubt as to Collectability – Special Circumstances
  3. Effective Tax Administration
  4. Offers In Compromise – Doubt as to Liability (OIC-DATL)

With the first three offers listed above, the taxpayer agrees that they owe the government but for various reasons, are unable to pay the government in full.  These are the majority of Offers filed.  With the 4 option (the OIC-DATL), the taxpayer either doubts the existence of the tax debt or the amount of the liability. 

How to File an OIC-DATL

  • The Offer will be filed on Form 656-L. 
  • Send the offer to the IRS’s Brookhaven Campus (see 656-L for instructions and the exact current address)
  • Provide Support.  You will need to state why you believe the IRS is billing you for the wrong amount and support your position.
  • You will need to Offer at least $1.  This is called an Offer in Compromise so you must make an offer to the IRS.  I can’t tell you what to offer but generally, if you believe you owe nothing, your offer will be $1.  If you believe you owe an amount different than the IRS, you will offer the amount you believe you owe.
  • If you are denied, you have Appeal rights so use them. 

 If you find you need professional help, feel free to contact us by calling (954) 715-7285 or you can request an appointment directly on my personal calendar at https://jablonskyandassociates.com/contact/

Bob Jablonsky is the founder of Bob Jablonsky & Associates. He has spent his career helping taxpayers resolve tax issues and get back on track with the IRS. In addition to tax resolution his firm also prepares hundreds of tax returns every year for both individuals and small to mid-sized businesses.

Bob is an IRS Enrolled Agent (EA), which is an elite credential issued by the Internal Revenue Service to professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation, and representation matters. An Enrolled Agent license is the highest credential awarded by the IRS and is recognized across all 50 states. Additionally he is a CMA, or Certified Management Accountant, a designation for financial controllers and CFOs (Chief Financial Officers), as well as an Advanced Certified Quickbooks Pro Advisor.

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