Articles Posted in Offers in Compromise

The United States Tax Court held that the IRS did not abuse its discretion when the Appeals Division upheld a notice of intent to levy issued under Internal Revenue Code § 6330. In West v. Commissioner, TC Memo. 2008-30, the Wests had obtained an offer in compromise from the IRS, but then violated its terms by failing to pay estimated taxes, failing to timely file tax returns, and failing to pay multiple tax penalties assessed against them during the 5 year period following the acceptance of their offer in compromise.

To make matters worse the IRS tried to notify the Wests about the impending default of the their offer in compromise, but the Wests had moved, and failed to notify the IRS of their new address. The Wests tried to rely on the failure of the IRS to notify their representative that their offer in compromise was in danger, but the Tax Court held that the IRS had no duty to notify their representative.

Points to Remember:

The United States Tax Court recently held that it could not consider a couple’s offer in compromise based upon doubt as to liability since it was a challenge to the underlying tax liability. In Baltic v. Commissioner, 129 T.C. No. 19 (2007) the Internal Revenue Service (IRS) had issued a notice of deficiency to the Baltics, but the Baltics did not file a Petition with the Tax Court. Later, after the IRS filed a lien, they filed a Request for a Collection Due Process Hearing, and submitted an offer in compromise based upon doubt as to liability, arguing that the notice of deficiency was in error. The IRS Appeals Officer refused to consider the offer in compromise, and the Baltics appealed that decision to the Tax Court.

Not surprisingly, the Tax Court held the offer in compromise based upon doubt as to liability was simply a method of challenging the underlying tax liability, and since the Baltics could have filed a petition with the Tax Court at the time they received their notice of deficiency they were barred from disputing the tax liability in the Collection Due Process Hearing.

The Baltics could have filed an offer in compromise based upon doubt as to collectibility, and the IRS would have been forced to act on it, and if it was denied then the Baltics could have had the Tax Court review that determination. Perhaps the Baltics didn’t file an offer in compromise based upon doubt as to collectibility because they thought they wouldn’t have qualified for one, but whatever the reason their attempt at getting the Tax Court to consider whether they actually owed the amount the IRS claimed was rebuffed.