Offer in Compromise, Effective Tax Administration
Most offers are filed based on the taxpayer's ability to pay. Usually health, and age, play are small role in deciding whether or not the taxpayer can pay the amount each month that is decided on. Less often are filed offers that are based on doubt as to liability. When there is doubt that the liability is owed by the taxpayer then the IRS may also settle for less. In more recent years, the IRS added another category, called "effective tax administration".
Here they take into account whether or not it is practical, probable, and in keeping with public opinion to continue to collect large amounts of tax from someone who is in very poor health, or elderly and not able to work. The taxpayer may have sufficient equity in their home to pay the tax. But if they lose their home, they won't be able to afford rent. Or they may have no collateral for loans to pay for medication and Dr's bills. If requiring full payment would create an economic hardship, then this may be the type of offer to file. The assets that would cause the hardship is isolated or removed from the offer request.
Success of an Effective Tax Administration Offer
The IRS has been rejecting these type of offers from what I hear. I've only done a few of them. One was turned down. We were told that at 52 the taxpayer could use his advanced degree and work and pay off the liability. Sometimes depression as an illness is not widely accepted. I again remembered that resolution is at the discretion of the IRS, and sometimes my opinion is the same as theirs.
If this type of offer fails and installment agreement must be set up. I would set up the most minimal monthly amount, such as $50. Then upon timely payment of this and any tax liabilities as accrued, the taxpayer will have an indefinite agreement. A CNC, currently not collectable agreement may save the $50 per month, but it will invite the IRS back for reconsideration later on. We are available to help you make the right choices when dealing with the IRS.
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