Effective Tax Administration (ETA) offers are among the most difficult IRS settlements to secure. Unlike traditional Offers in Compromise (OIC), which are based on a simple mathematical inability to pay, an ETA offer is based on the IRS’s discretion regarding “fairness” and “equity.”
Because these offers are subjective, understanding the reasons for these failures is essential for any taxpayer seeking this form of relief. At Highland Tax Group, we can assist you in requesting an ETA to prevent rejection. If you’ve already been rejected, we can help in making the necessary corrections.
Insufficient Proof of Economic Hardship
The IRS does not grant hardship status based on a general “lack of funds.” Instead, a taxpayer must provide specific documentation, such as medical records, long-term care cost projections, or proof of disabled dependents, to show that full payment would impair basic health and welfare.
The “Best Interest of the Government” Clause
The IRS may reject an offer if they believe accepting it is not in the government’s best interest. This often happens when a taxpayer has a history of chronic noncompliance or when the IRS believes it can collect more money through other means, such as an installment agreement, without causing undue hardship.
Asset Valuation Discrepancies
Even in ETA cases where equity isn’t the primary focus, the IRS conducts a thorough Asset/Equity Table (AET) analysis. If a taxpayer undervalues assets, such as real estate or retirement accounts, the IRS may view the offer as a “lowball” attempt rather than a good-faith request for equity.
Procedural Noncompliance
The IRS will return an offer as “non-processable” if the taxpayer is not current on all filing requirements.
What to Do After a Rejection
When an ETA offer is rejected, the IRS provides a 30-day window to file a formal appeal. An appeal allows for the presentation of new evidence or a rebuttal of the IRS’s specific findings regarding income and expenses. The appeal provides a fresh look at the “Public Policy” and “Equity” arguments that may have been dismissed during the initial investigation.
If You’re Struggling with the ETA Process, Call Highland Tax Group
Navigating the complexities of an ETA offer requires a lot of documentation and a deep understanding of how the IRS operates. At Highland Tax Group, we are well-versed in ETA applications and appealing denials. Contact our team today.