The Modernization of the IRS Offer in Compromise Process: What’s Happening and What it Might Mean for You if You Want an OIC!

The Internal Revenue Service (IRS) will make all IRS offers in compromise cases available online instead of just having hard copies available at local offices, according to a new report from the Treasury Inspector General for Tax Administration (TIGTA).

FILE - In this photo March 22, 2013 file photo, the exterior of the Internal Revenue Service (IRS) building in Washington. Politicians love trying to use the tax code to highlight their goals to voters. This year, it’s a battlefield between Hillary Clinton, who wants to boost levies on the rich to pay for expanding social programs and Donald Trump, who says cutting taxes would gird the economy. The clash has consequences for the rich, poor and those in the middle. (AP Photo/Susan Walsh, File)

Following several high-profile scandals throughout the early 1950s, the IRS was forced to provide the public with access to its accepted OIC’s. Under the Tax Code, the public is legally entitled to inspect these cases. Once the IRS accepts an OIC, it creates a hard copy public inspection file that is then sent to one of seven offices across the U.S., depending on where the taxpayer resides. Should a member of the public wish to view the files, they must make an appointment with the IRS to do so.

Under the previous system, however, if the IRS failed to properly redact the public inspection files, sensitive taxpayer information is at risk of exposure, putting taxpayers at risk of identity theft. Compared to when OIC’s first became subject to public inspection, the IRS accepts 20 times more OIC’s. Yet the agency still relies on labor-intensive procedures to securely store the files in these paper-based, decentralized systems around the country. It’s also a continuous challenge for the IRS to ensure the files are properly redacted to protect sensitive taxpayer information and to make sure the paper-based files are ready for review.

The IRS may set up a centralized website for the public that would decrease both costs to the IRS and the burden on taxpayers while increasing transparency. During the course of the TIGTA review, the IRS also initiated the evaluation of alternative file storage methods, expanded the use of automated redaction tools and updated its written procedures for the public inspection files.

Taxpayers will no longer be required to make an appointment to view public OIC’s and will instead gain access through the website. However, several security concerns may still exist, including hacking and other illegal methods of obtaining sensitive information.

According to the commissioner of the IRS’s Small Business/Self-Employed Division, Karen Schiller, “Using an electronic format will allow us to better manage the retrieval, movement, retention and destruction of files.”

Please let us know if you’re considering an IRS Offer in Compromise. We would be happy to provide guidance in relation to this tedious process. Call us directly at 720-398-6088.