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Large Dollar SFRs and OICs

SFRs are substitute for returns prepared by the IRS.
The issue has not been litigated in the ninth circuit, but IRS is successfully challenging the discharge in California and Nevada.

TPs, taxpayers, only options are CNC – currently not collectable, IA – installment agreement or OIC – Offer in compromise.

Is the TP required to file tax returns in order to submit an OIC?  The answer is ‘no’;  there is no requirement in the IRM – Internal Revenue Manual that the TP file returns to submit an OIC.

There is a requirement in the IRM that the TP cannot pay off the tax debt on an IA over the life of the collection statute.  If TP wants an OIC, large balances are to the advantage of the TP.

The last few years tax returns should be filed…hopefully there are no balances or small ones.  As to the prior years, why should TP spend the dollars to get the audit reconsideration returns prepared?  As a long term colleague of mine commented, “That’s like rearranging the deck chairs on the Titantic.”

 When a TP submits the OIC, he or she should be careful to designate the payments made to the most current SFRs.  The IRS only has ten years from the date of assessment to collect the taxes.  If the OIC is rejected, the TP would like  relief on the older years from the CSED – collection statute expiration date.


Dana M. Ronald

July 4, 2013