The IRS is notoriously careful when it undergoes an investigative process. This band of starched auditors is comprised of accountants and bureaucrats whose sense of humor could survive in a desert. To some degree, this federal agency is laudable because of their efficiency and accountability. In effect, they guarantee America’s tax code is followed to the letter.
Statistically, every year, the IRS accepts less than 25% of all offer in compromise settlements. If your offer in compromise isn’t filled up to their codes, which are exhaustive, it is unlikely it will be accepted. You are also susceptible to further, painstaking investigation in the form of an audit.
Before accepting an offer in compromise, the IRS has a responsibility to review it with all due diligence. Typically, if an offer is accepted, it’s because they find a person lacks the income to pay, in full, their owed back taxes, and have properly dissolved all their unnecessary assets to what is possible of their tax liability. The IRS will be sure to assess one’s cost of living expenses against their income, before deeming that the prorated tax liability, the offer in compromise, is fair.
If you don’t adequately file your offer in compromise, you could be subject to a full-scale audit. If they IRS finds you have dissipated assets that aren’t a business expense or medically related, and aren’t older than five years, you could be on the hook for those. A dissipated asset is something like the money from a sold car you used to pay off other debts.
It is best to seek legal counsel before filing your offer in compromise. The IRS promises to investigate all claims with due diligence. Without care, this can lead to a bigger tax liability headache.