During my time as a Revenue Officer at the IRS, I saw a lot of little mistakes on OIC forms that had big impacts on cases. Sometimes these mistakes would only cause confusion and stall the case until the mistake could be clarified. Sometimes the mistakes were enough to get the offer rejected outright. Either result is time-consuming and costly for both you and your clients. In today’s email, I want to go over a few of these simple mistakes, why they matter, and the easiest way you can make sure they don’t happen to you.
You probably wouldn’t expect this, but I saw a lot of bad math from tax pros during my time at the IRS. Not because CPAs and EAs are bad at math, but because perfectly filling out a form 433 is hard. It requires juggling dozens of complex numbers and figures, not to mention all the explanations and supporting documentation that accompany the numbers. It’s no wonder the ball gets dropped sometimes.
Unfortunately, when that ball does get dropped—a quick-sale value is calculated incorrectly, or an expense is included in the wrong calculation—the whole OIC process has to come to a screeching halt until the mistake is sorted out.
When I saw an empty field on a 433 or 656 (something I saw far too frequently), there was no way for me to know why the practitioner had left it blank. Was it blank because it didn’t apply to the taxpayer? Because they didn’t understand how to answer? Or was I missing information crucial to the case and the tax pro made a simple mistake? I had to know the answer before I could proceed with my recommendation on the offer. It’s a shame that something so small can hold up such an important decision, but I saw it happen often.
This is another mistake I saw frequently: when a taxpayer’s property was worth less than they owed on it, the preparer would often subtract that negative equity from the taxpayer’s net realizable equity (NRE). You can’t do that, helpful as it may seem to your client’s case. Any asset with negative equity should have a reported equity of zero.
There are a couple ways you can go about making sure these kinds of mistakes don’t happen on your offers. You could hire someone to obsessively pour over every facet of your return, recalculate ever calculation and double check every form field for accuracy. You certainly don’t have time to do every offer twice.
Or you can use tax resolution software to do all that for you. I can’t speak specifically to other tax resolution softwares, but I know that Canopy solves each of the problems I’ve outlined here. When you use Canopy to prepare your OIC, our software does all of the calculating for you, make sure you don’t leave any blank fields, and helps you comply with IRS standards. Not only does that save you time, it also helps make your offer as error-free as possible. That means fewer hangups and less lost time.
Just as importantly, Canopy frees you up to worry about more important things than exactly how to comply with every nuanced IRS standard. How you spend that time—building client relationships, growing your practice, perfecting your golf swing—is up to you.
Look out for Part 5 where I’ll be talking about the most common reasons offers are rejected, and what your options are if your offer gets rejected.
Disclaimer: Tax law is complicated. Nothing I’ve said here should be mistaken for authoritative legal advice. Similarly, my commentary on my time at the IRS is reflective of my personal experience, and not any official stance or policy of Canopy or the IRS.