The IRS Offer in Compromise Doubt as to Collectibility with Special Circumstances (OIC DATCSC) is a variation of the Offer in Compromise Doubt as to Collectibility (OIC DATC) that I recently wrote about here. Both of these OIC's share the same basic concept that the tax liability is greater than the Reasonable Collection Potential (RCP).
An Offer in Compromise Doubt as to Collectibility with Special Circumstances (OIC DATCSC) allows an offer to be accepted for less than the RCP. This is a rare program requiring special circumstances that warrant such favorable treatment by the IRS. To qualify you must be able to prove at least one of the following:
1. Economic Hardship
Factors that support economic hardship are a long term illness, medical condition, disability, care for a dependent or the tapping of assets resulting in the taxpayer unable to meet basic living expenses. The IRS needs to balance their requirement to collect taxes due with the economic repercussions of tax collection leading to federal, state and local governments having to expend resources to support the taxpayer with assistance programs for things like food, housing and health care. The IRS wants to treat citizens in a humane fashion that allows them to maintain self sufficiency after payment of taxes is concluded.
2. Public Policy/Equity
This includes a taxpayer liability as a result of an IRS processing error.
If a taxpayer relied on bad advice from the IRS.
Delays caused by the IRS leading to an increased tax liability.
Taxpayers that are the victim of a crime or fraud.
Offer is equal to or greater than RCP
- May qualify for OIC DATC
- May qualify for OIC DATCSC
"Long Haulers" affected by COVID-19 with persistant symptoms may be candidates for an OIC DATCSC. The standard is a continuing medical condition or illness and COVID-19 might qualify. Long term economic impact would have to be proven as well. The IRS hopefully will release guidance in the future related to OIC DATCSC offers and COVID-19 clarifying who would and would not be eligible. Even if an OIC DATCSC is not available for an individual, an OIC DATC still may be accepted by the IRS. Consider adding these programs to your tool kit when dealing with an IRS tax liability.
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