timing of OIC

[Unregistered]

Taxpayer is being audited, but the IRS has not yet sent notice of deficiency. When is best time to make OIC?

[jainen]

What was the result of the audit, and how did that differ from your goals for it? What would you hope to accomplish with an Offer in Compromise?

[buxtaxmann]

Oic

The audit had to do with business expenses for a over the road truck driver. He used the per-diem scheduled amounts for days away from home base. Did not keep receipts for expenses. I though perhaps we could get a lesser tax deficency by OIC.

[jainen]

most of the work

>>perhaps we could get a lesser tax deficency by OIC<<

An OIC does not reduce a tax deficiency. If you have grounds for that, you should appeal or go to tax court. (There is a procedure for OIC based on doubt that the taxpayer actually owes the money, but that wouldn't seem to apply in your case.)

Your Offer in Compromise would be based strictly on ability to pay. To be accepted, you must offer more than the IRS could expect to receive through their normal collection procedures such as levy over the next five years.

Preparing an offer in compromise generally takes at least 20 to 30 hours, which your client may not be willing to pay for unless you can demonstrate some likelihood of success. You might start with a financial analysis to see what is feasible. You usually can charge less than ten hours for that if the client does most of the work.

[Bees Knees]

Your Offer in Compromise would be based strictly on ability to pay.

Well, that's not entirely true.

Ability to pay is one of three reasons for an OIC. The other two are doubt as to liability, and to promote effective tax administration.

This poster seems to be leaning towards using the OIC to settle a dispute over the audit results. There is doubt as to the tax liability. Why did IRS deny a per diem deduction for an over the road truck driver?

Maybe doing an OIC was easier than taking it to appeals or tax court. I don’t know. Maybe not. It is a legit function, however, for an OIC.

[jainen]

The question

>>using the OIC to settle a dispute over the audit results<<

The question is whether to file an OIC before the tax has even been assessed! I can't say that is doubt as to liability--I don't know what it is. The original post said the deduction was denied because the taxpayer didn't have records, which puts the IRS on pretty solid ground. The chances for compromise are much better in appeals than in collections, in my opinion.