Taxation & Estate Planning

IRS taking too long to decide your offer in compromise? After two years, its accepted.

By howardlevy

The IRS is generally known to be prompt in processing offers in compromise.

But the IRS is also known for losing files and not processing claims. Sometimes, things get washed into the big bureacracy.

So, what if the IRS takes its time on your offer, or it slips through the cracks unattended without an answer?  Time can be on your side.

If the IRS does not make an initial decision on your offer within two years, the amount you offered is automatically accepted. Internal Revenue Code Section 7122(f) governs the offer “snooze and lose” timelines.

The IRS is considered to have made a decision on your offer if you receive an initial rejection, it is returned as nonprocessable, you withdraw it or it is you do not make upfront payments while it is pending.  The time the IRS considers your appeal of a rejected compromise is not part of the two year period as the rejection qualifies as the decision for purposes of the statute.

It is always best to have verification of your offer filing date if the IRS does sit too long on the offer (hand stamped copies are best).

Your knee-jerk reaction to not hearing from the IRS for a while on an offer may be to call and get that compromise on track.  Usually, the IRS makes a decision on an offer within six to nine months. But if time ticks away with no answer, having the offer sit quietly undisturbed should be factored into your strategy.

Full post as published by IRS and the Law on October 10, 2009 (boomark / email).