CTRS CTRS Offer in Compromise 2 — Questions and Answers
Question 1: Which IRS forms are required to submit a Doubt as to Collectibility OIC for an individual taxpayer?
- Form 656 and Form 433-A (OIC) (Correct answer)
- Form 9465 and Form 433-A
- Form 843 and Form 1040-X
- Form 12153 and Form 433-B
Correct answer: Form 656 and Form 433-A (OIC)
An individual DATC OIC requires Form 656 (Offer in Compromise) and Form 433-A (OIC) (Collection Information Statement for Wage Earners and Self-Employed Individuals).
Question 2: What does the term 'dissipated assets' mean in the context of an OIC investigation?
- Assets the taxpayer transferred or spent for less than fair market value, which the IRS may add back to RCP (Correct answer)
- Assets that have depreciated below their original purchase price
- Assets held in foreign accounts not disclosed on the FBAR
- Assets encumbered by senior creditors
Correct answer: Assets the taxpayer transferred or spent for less than fair market value, which the IRS may add back to RCP
Dissipated assets are those transferred away or consumed by the taxpayer below fair market value; the IRS adds their value back to RCP when evaluating an OIC.
Question 3: During the pendency of an OIC investigation, what happens to the Collection Statute Expiration Date (CSED)?
- The CSED is tolled (suspended) for the period the OIC is pending plus 30 days (Correct answer)
- The CSED continues to run normally
- The CSED is permanently extended by one year
- The CSED is reset to a new 10-year period
Correct answer: The CSED is tolled (suspended) for the period the OIC is pending plus 30 days
While an OIC is pending and for 30 days after its rejection, the CSED is tolled under IRC §6331(i), preserving the IRS's collection window.
Question 4: What is an Effective Tax Administration (ETA) OIC and when is it appropriate?
- An OIC where the taxpayer can pay the full liability but collection would create economic hardship or be inequitable (Correct answer)
- An OIC where the taxpayer disputes the legal validity of the tax assessment
- An OIC filed by tax-exempt organizations only
- An OIC for payroll tax liabilities that cannot be reduced otherwise
Correct answer: An OIC where the taxpayer can pay the full liability but collection would create economic hardship or be inequitable
An ETA offer is appropriate when the taxpayer has the ability to pay the full liability but doing so would either create economic hardship or be inequitable and not in the best interest of the government.
Question 5: What is the OIC 'Pre-Qualifier Tool' published by the IRS?
- An online tool on the IRS website that helps determine if a taxpayer is likely to qualify for an OIC based on income, expenses, and assets (Correct answer)
- A software program used internally by IRS examiners to evaluate offers
- A third-party tool that automatically submits OICs electronically
- A calculator that determines the exact offer amount the IRS will accept
Correct answer: An online tool on the IRS website that helps determine if a taxpayer is likely to qualify for an OIC based on income, expenses, and assets
The IRS OIC Pre-Qualifier Tool is a free online resource that allows taxpayers and practitioners to input financial data and see whether an OIC is likely to be a viable option.
Question 6: If the IRS rejects an OIC, what is the taxpayer's next administrative option?
- File an appeal with the IRS Office of Appeals within 30 days of the rejection letter (Correct answer)
- File a petition in Tax Court within 90 days
- Submit a new OIC immediately with a higher offer amount
- Request a Collection Due Process hearing within 30 days
Correct answer: File an appeal with the IRS Office of Appeals within 30 days of the rejection letter
A rejected OIC may be appealed to the IRS Office of Appeals within 30 days of the rejection letter, giving the taxpayer another opportunity to present their case.
CTRS CTRS Offer in Compromise 2
Which IRS forms are required to submit a Doubt as to Collectibility OIC for an individual taxpayer?