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Taxpayers see delays in their offers in compromise to IRS

For some California taxpayers with burdensome tax debts, an offer in compromise, commonly abbreviated OIC, can provide relief. Under an OIC, the Internal Revenue Service agrees to accept less than the full amount of a person's tax liability in satisfaction of the debt. Many taxpayers are discovering that the relief provided by an OIC is slow in coming, however, according to a Treasury Inspector General for Tax Administration report.

After criticism from the National Taxpayer Advocate, the IRS has taken steps in recent years to reform and improve the offer in compromise program. These steps included making the OIC process smoother for ordinary taxpayers whose debts or income were below certain thresholds. People have responded to the improvements by filing more offers, with the IRS reporting an increase of more than 13,000 offers between 2007 and 2011. The effect of the recent recession has also caused more taxpayers to seek the aid of an OIC.

But the TIGTA report indicates that the IRS was not prepared for the increase in offers in compromise. The agency uses two locations to respond to offers, and TIGTA revealed that the number of offers exceeded their capacity to handle them. Over 7,000 offers were not even assigned to an IRS employee yet, and some had not been dealt with in over half a year. The IRS can transfer offers from one location to another, but both were so overloaded that one could not have helped the other process offers any faster.

But the OIC program still remains a valuable and effective tool for taxpayers with difficult tax debts. The IRS has stated that it will take steps to respond to the offers more efficiently, including adopting a smoother process for all offers.

Source: Forbes, "Trying To Come Clean With The IRS? Get In Line." Ashlea Ebeling, April 12, 2012.

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