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Offer in Compromise, hardship or wait out 10 year Statute of Limitations

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jomustard

Junior Member
What is the name of your state?California
Arranged an installment agreement for 6 years to pay taxes owed from (2005-2009) on a small online business my brother and I had. Paid $80 a month totaling several thousand. With the penalties and interest accumulating I was frustrated that the amount wasn't decreasing as it should.

I put in an offer in compromise in April 2019 for the $6700 Back taxes owed (2009- 2012). After 2012 I am current...business dissolved in 2015.
The latest letter from IRS says that based upon my current financial info, they have determined that I have the ability to pay in full. IRS has calendared a conference to discuss my exceptional circumstances on January 8 2020. My circumstances being the illness of my brother, who has cirrhosis, Hiatal Hernia, and Parathyroid. I have been his caregiver for the past 4 years. My age of 60 and limited future earning potential makes for a bleak financial future.
I am concerned because we do own our own home and a car. IRS determined my ability to pay was not based on my current income but the assets (home and car). We owned a more expensive home 5 years ago but sold it at a capital loss of $60,000. The home we are in now is $135,000 with a $40,000 mortgage.
Did I make a mistake by putting in the offer in compromise? should have just let the 10-year period run out ---would the statute run out in 2022 since 2012 was the last year taxes were owed.? How does the hardship circumstance fit in for the OIC......ELderly, caring for brother On disability. Low income.
 


jomustard

Junior Member
Along with the IRS letter is a form Taxpayer Request to withdraw Offer in Compromise. I understand now that the statute of limitations stops when put in a OIC. So if I withdraw would the 10 year clock continue ticking where it left off before the OIC?
 

LdiJ

Senior Member
Along with the IRS letter is a form Taxpayer Request to withdraw Offer in Compromise. I understand now that the statute of limitations stops when put in a OIC. So if I withdraw would the 10 year clock continue ticking where it left off before the OIC?
Yes if you withdraw it the clock starts ticking again.
 

Taxing Matters

Overtaxed Member
So if I withdraw would the 10 year clock continue ticking where it left off before the OIC?
The SOL for collection is suspended during the time the OIC is pending with the IRS, including any time the matter is pending in appeals. The SOL will begin to run again if you withdraw the offer as of the date the IRS gets the withdrawal, but the SOL is still extended for the time the offer was under consideration. Note that if your installment agreement was entered into before the OIC was submitted and included an extension of the SOL the tolling period from the OIC gets added to the extended date from the installment agreement.
 

Taxing Matters

Overtaxed Member
would the statute run out in 2022 since 2012 was the last year taxes were owed.?
No. The SOL for collection starts to run on the date the tax is assessed. The tax is only assessed after you filed the return. If you filed the 2012 return on April 15, 2013 then the tax would be assessed a few weeks after that. So if the assessment was done on May 10, 2013 that is when the 10 years would start to run. Then you have to factor in anything that extends (tolls) the SOL, like submitting a OIC, signing an installment agreement that extends the SOL, bankruptcy, being out of the country, etc.

As for whether you made a mistake in submitting the OIC and what you should do from here, I cannot tell you that because I don't have all the details of your situation. Consulting a tax attorney or other tax professional with experience in collection matters (and not all tax pros have that experience) might be worthwhile.
 

jomustard

Junior Member
The SOL for collection is suspended during the time the OIC is pending with the IRS, including any time the matter is pending in appeals. The SOL will begin to run again if you withdraw the offer as of the date the IRS gets the withdrawal, but the SOL is still extended for the time the offer was under consideration. Note that if your installment agreement was entered into before the OIC was submitted and included an extension of the SOL the tolling period from the OIC gets added to the extended date from the installment agreement.
So if I have an installment agreement ending for tax year 2012 then I submit a OIC April 2019 and withdraw the OIC Jan 2020, so the SOL will have to be extended 10 months while the OIC was under consideration?
 

jomustard

Junior Member
The SOL for collection is suspended during the time the OIC is pending with the IRS, including any time the matter is pending in appeals. The SOL will begin to run again if you withdraw the offer as of the date the IRS gets the withdrawal, but the SOL is still extended for the time the offer was under consideration. Note that if your installment agreement was entered into before the OIC was submitted and included an extension of the SOL the tolling period from the OIC gets added to the extended date from the installment agreement.
So if I withdraw the OIC can I just resume paying the installment agreement of $80 a month?
 

jomustard

Junior Member
IRS also wanted to discuss the exceptional circumstances in a conference Jan. 8, 2020. So there may still be hope for the OIC. If it doesn't work out after that can I put in the withdrawal? Or would I need to put in the withdrawal first?
 

Taxing Matters

Overtaxed Member
So if I have an installment agreement ending for tax year 2012 then I submit a OIC April 2019 and withdraw the OIC Jan 2020, so the SOL will have to be extended 10 months while the OIC was under consideration?
Yes.

IRS also wanted to discuss the exceptional circumstances in a conference Jan. 8, 2020. So there may still be hope for the OIC. If it doesn't work out after that can I put in the withdrawal? Or would I need to put in the withdrawal first?
I'd not withdraw the OIC until after the conference. It's only a few days away, and perhaps there is still a chance to save the OIC.

By the way, depending on the exact type of tax liability involved it is also possible that bankruptcy would allow you to get rid of these tax obligations.
 

davew9128

Junior Member
By the way, depending on the exact type of tax liability involved it is also possible that bankruptcy would allow you to get rid of these tax obligations.
I would question how the owners of a defunct business would personally owe tax to the IRS (rhetorical I already know the answer), based solely on being the owner.

OP, what kind of business structure was it and what type of taxes owed?
 

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