OIC with IRS and then filing Chapter 7

[sassiebaz]

i have an offer in compromise with the irs for 2005/2006 taxes.....will i be able to discharge these in my chapter 7...the taxes that were owed and ...that are included in the offer in compromise qualify for all the "BKY Rules" for discharge

Just a quick question: How did you do the OIC? I have a friend that desperately needs to do this but she says it's so overwhelming. Did you hire someone to do it for you?

[HHM]

Getting an OIC approved can be much harder than getting a BK. There is a new streamlined OIC; basically, if you are below poverty, the OIC is actually somewhat easy...but if not, the acceptance rate of OIC's is about 10%.

[bobbieyomama]

sassiebaz...I did do it myself....and yes it was a lot of work...and took 12 months to finally get accepted...but well worth the fight...tell your friend...do it your self....because you have to gather and provide all of the information to either the IRS OR the person you hire...so may as well submit it themselves!! Good luck!

[bobbieyomama]

HHM...I am wondering..when I file my bankruptcy...do I use the original amount of tax owed $30,000 +/ or the amount of the OIC $6,000 / or the balance owed on the OIC approx $3,500...
and from what I can see...you agree with me that the 240 plus 30 days (tolling) APPLIES from the date the OIC was accepted...
not like biotechsolution is saying...that I must cancel the OIC and then wait the 270 days...

[biotechsolution]

Word of warning. If you don't wait the 270 days from when you cancel the OIC till you file the taxes won't be dischargeable. Plus the IRS will go after the
entire amount, not the OIC agreed amount. Since you never finished the OIC.
I filed pro se after an attempted OIC for the amount of 224K so I've been through this before.

[Gonzo]

The other reason for the tolling after filing for OIC is to allow the IRS time to file a Notice of Lien - if not already done. My understanding is that if you withdraw from the OIC, you have to send the IRS a letter. They use the date of receipt of that letter as the start date for the tolling.

[bobbieyomama]

ok...so the oic has a balance that i will still have to pay....in my chapter 7...are they priority tax (that i show still owed) so i can continue to pay the oic after bankruptcy

[Gonzo]

ok...so the oic has a balance that i will still have to pay....in my chapter 7...are they priority tax (that i show still owed) so i can continue to pay the oic after bankruptcy

Tough questions bobbieyomama (btw, I like your name.)

I just wouldn't feel comfortable answering because the information is so important for whatever you decide to do.

Before you file, you need to know for certain - 100%. Making a mistake could be uhhh - a mistake.

Did you try going to the IRS website? Try here: http://www.irs.gov/irm/part5/irm_05-008-010.html

Scroll down to the section that says: Bankruptcy After Offer In Compromise Acceptance. Not a lot there but gives you a start. The IRS rules can be so tricky and confusing.

Best to you.

[HHM]

This may provide some guideance

5.9.4.10.1 (01-14-2011)
Accepted but Not Completed Administrative OICs

The Service's Claim and Incomplete Administrative OICs. When a taxpayer with an accepted but not completed administrative offer in compromise files for bankruptcy, the Service has a claim for the full amount of the underlying tax liability because the OIC has not yet been satisfied. Section V(i) of Form 656, Offer in Compromise, provides the tax being compromised remains a tax liability until the taxpayer meets all the terms and conditions of the offer.

Basically, if you have an accepted OIC, the IRS will ignore the OIC balance due if there is something more it can gain from the BK. However, if there is nothing more to gain, so long as after the BK, the taxpayer resumes the OIC payments, it appears the OIC will not be terminated.

[BarkingCat]

Curious if anyone knows anything about how time is calculated for overlapping tolling events? In my case, the overlapping events were a timely-filed CDP request and a the filing of a (rejected) OIC.

The IRM 5.1.19.3 is pretty clear; overlapping events do not run consecutively when calculating the collection statute expiration:

If more than one case action suspends the running of the collection statute, and the suspensions overlap, the CSED is viewed as extended only once for the period the suspensions overlap.

Would the same be true when calculating the eligibility of the tax for discharge in bankruptcy?

[HHM]

Although I cannot say for "certain" but from a practical stand point, not sure how it could be any different. If two tolling events over lap, you do not add them together, they both simply run during their respective times. They would basically combine, but no compound. For example,

1. File CPD June 2010
2. Filed OIC in Jan 2011
3. OIC rejected in Oct 2011 (this would normally end the tolling period, + 30 days for the BK add on)
4. CDP closed, upholding OIC rejection, Feb 2012, (+ 90 days for the BK add on for CDP's).
Usually, the IRS will keep a CDP open during the pendancy of an OIC so that in the event of OIC rejection, appeals can more quickly resolve the case. But if, in your case, the CPD closed, then the end time would be the end date of the OIC + the BK statutory add on.

The tolling period would be from June 2010 to Feb 2012 plus the applicable BK statutory add-on.
Note, in my example, the OIC tolling would have fully run by the time the CDP closed.