Court: A Taxpayer’s Offer in Compromise (OIC) was Properly Rejected

An OIC is an agreement between a taxpayer and the IRS to settle a tax debt for less than the amount owed. The IRS can accept an OIC for reasons including that there’s: 1) doubt as to liability of the debt 2) doubt as to collectability of the debt.

One taxpayer who owed taxes of $25,000 made an OIC to settle the debt for $12,000. The IRS rejected his OIC because, while his income wasn’t disclosed, he had net of $110,000 in assets. He appealed, claiming the IRS should’ve reviewed his ability to pay from his income, not his assets. The U.S. Tax Court rejected his appeal because he had enough assets to pay the debt. (Banks, TC Memo 2019-166)

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