CTRS Offer in Compromise Flashcards

What are the three grounds upon which an Offer in Compromise (OIC) may be submitted?

Answer: Doubt as to Liability, Doubt as to Collectibility, and Effective Tax Administration

An OIC may be submitted on three grounds: Doubt as to Liability (DATL), Doubt as to Collectibility (DATC), or Effective Tax Administration (ETA).

What is Reasonable Collection Potential (RCP) and why is it central to the OIC process?

Answer: RCP is the IRS's estimate of the maximum amount it could collect from the taxpayer, and an OIC must generally equal or exceed this amount

RCP represents what the IRS believes it can collect through all available means, and a successful DATC offer must generally meet or exceed the taxpayer's RCP.

What is the standard formula for calculating the offer amount under the Lump Sum Cash payment option?

Answer: Net equity in assets + (monthly disposable income × 12)

For a lump sum cash offer (paid within 5 months), the offer amount equals net equity in assets plus monthly disposable income multiplied by 12.

What is the non-refundable application fee for submitting an Offer in Compromise as of recent IRS guidance?

Answer: $205

The IRS charges a $205 non-refundable application fee for submitting an OIC, though this fee may be waived for low-income taxpayers.

What is the Low Income Certification and how does it affect OIC submission requirements?

Answer: It exempts qualifying low-income taxpayers from both the application fee and the required initial payment

Low Income Certification allows taxpayers at or below 250% of the federal poverty level to submit an OIC without paying the $205 application fee or the required initial payment.

How long does the IRS generally have to accept or reject an OIC before it is deemed accepted by default?

Answer: 24 months from the date the IRS received the offer

Under IRC §7122(f), if the IRS does not make a determination on an OIC within 24 months of receipt, the offer is deemed accepted.