But I Don’t Owe This! When to Use a “Doubt as to Liability” Offer in Compromise
It may sound to good to be true, but if you feel you do not owe some part of your tax debt, you can raise your concerns to the IRS. This is called a doubt as to liability offer in compromise. Let’s first take a step back to our series on offer in compromise to understand this term before discussing doubt as to liability.
What is an Offer in Compromise?
The Offer in Compromise allow tax debts, except criminal restitution, owed to the IRS to be compromised or settled by eligible taxpayers. Federal excise taxes and employee payroll tax withholdings can all be compromised. The IRS can collect the whole tax debt (including any interest and penalties that accrued) only if the taxpayer violates the terms of the offer in compromise. Normally, this happens when the taxpayer does not file and pay his or her taxes on any future tax returns for the next five years after the offer is accepted.
What to know before filing a debt as a liability offer
First and foremost, in order for the debt as a liability offer in compromise to be considered, there must be a legitimate concern or doubt about some or all of the tax debt owed. After establishing that there is a legitimate dispute, there must be supporting documentation for the claim. This documentation along with any other evidence you may have can be used to present your case, and have your case assessed.
These cases are treated similarly to IRS tax audit reconsiderations. The person filing must also provide a written statement explaining their case and why they do not owe part or all of the debt assessment. The IRS required Form 656-L must also be completed prior to filing this claim.
Where doubt as a liability can be used
There are a few different scenarios where doubt as a liability offer in compromise can be used. Here are a few:
- The tax was discharged fully in bankruptcy.
- The statute of limitations ran out on collections.
- The tax information has been evaluated for the incorrect taxpayer.
- Misinterpretation of a tax law
- Tax examiner failed to consider new evidence or evidence that has not been considered was presented
- The IRS misplaced an amended return.
Filing a doubt as to liability offer may not be the best option when assessing the filing of an offer in compromise but it could be the right option for some people. It’s important to be able to articulate your claim correctly and back it up with good supporting evidence that will make your case as strong as possible. It’s also important to consult a professional if you are thinking of making this claim. A professional legal representative can help you understand if this is the best for you to pursue or if there are more viable, less complicated avenues to get you where you need to be.
I am Maine’s IRS Problem Solver. My firm helps Maine taxpayers in trouble. If you or someone you know in Southern Maine wants more information on how to resolve your unpaid taxes, please feel free to contact me directly at 207-502-7181 or by filing out my contact form. A Maine tax attorney can help you consider your options.