An Offer in Compromise (OIC) for doubt as to liability is used when there is a legitimate dispute as to whether the taxpayer actually owes the tax. This type of OIC is not based on your financial situation or ability to pay off your tax debt in full.
When There is Doubt as to Liability
You will need a convincing argument as to why it is doubtful you owe the back taxes the IRS thinks you owe. If you have already argued your case in Tax Court unsuccessfully, you can’t submit an OIC for doubt as to liability.
These cases typically involve some sort of mistake, error, or lost communication that resulted in an incorrect tax assessment. An OIC may be the only available option if your time to dispute the tax assessment has already passed.
Common Fact Patterns
You will need hard evidence to back up your claim. You should also consult a tax attorney to confirm that you have a legitimate doubt as to liability case.
For example, let’s say you submitted an incorrect return that resulted in a tax liability. You later noticed your errors and submitted an amended return that resulted in a refund or no tax owed. If the IRS lost your amended return or failed to process it, your account could show an amount due that the IRS will try to collect months or years later.
Other situations where an OIC for doubt as to liability could be appropriate include:
- Your employer or client reported incorrect income information on a W-2 or 1099 form
- The IRS audited and adjusted your return without your knowledge, and you have information to dispute their adjustment
- You didn’t receive IRS notices and were unable to provide the IRS will information in time to dispute a tax assessment
- The tax debt should have been discharged during a bankruptcy
If you have the proof you need to show that you don’t owe the tax in question, but you weren’t able to dispute the tax when it was assessed because of a mistake or error of some sort, a doubt as to liability OIC could be a viable tax resolution option.
If you don’t dispute the tax liability, but simply can’t pay it in full, you may want to consider a doubt as to collectibility Offer in Compromise.
The Gartzman Law Firm offers tax settlement help for both federal and state tax debt, including Offers in Compromise. Use our contact form to request a consultation with an Atlanta tax resolution attorney.