Offer in Compromise - Doubt as to Liability

Episode 84: In this episode, Timalyn talks about a type of Offer in Compromise that may help taxpayers when the IRS made a mistake and assessed taxes they do not actually owe. She explains what a Doubt as to Liability Offer in Compromise is, when it may apply, and why documentation matters when dealing with the IRS. What is a Doubt as to Liability Offer in Compromise? A Doubt as to Liability Offer in Compromise, also called DATL, is used when there is a legitimate dispute about whether the tax debt is actually owed or if the amount the IRS assessed is correct under the law. Timalyn explains that sometimes the IRS does make mistakes, and there are situations where taxpayers are assessed taxes they were not actually responsible for. Who may qualify for this option? This option may apply if you truly believe that you do not owe part or all of the tax debt that was assessed and you have documentation to support your position. What form is used? Taxpayers who believe they qualify can complete Form 656-L, which is the Offer in Compromise for Doubt as to Liability. The IRS will review the documentation before deciding whether to accept or deny the offer. When can’t you use this option? There are situations where this option is no longer available. For example, if the tax debt was already decided by a final court judgment, if you are currently in bankruptcy, or if another IRS department is still actively working the same issue. Timalyn also explains that if you requested an audit reconsideration, you generally want to wait for that process to finish before submitting a DATL offer. What kind of proof do you need? You need documentation and a written explanation showing why the tax debt is incorrect. Timalyn shares an example involving 1099-K forms where taxpayers actually reported the income correctly, but because there was no separate breakout on the tax return, the IRS believed income was missing and assessed additional taxes. By providing reports and documentation showing the income was already included, they were able to get the issue corrected. Why is documentation important? Timalyn explains that the less information you provide, the more digging the IRS may do. Not providing a written statement explaining why the tax debt is incorrect can cause the offer to be returned without further consideration. That is why it is important to make sure your documentation clearly supports the story you are telling the IRS. Is this the same as financial hardship? No. Timalyn reminds listeners that Doubt as to Liability is different from Doubt as to Collectability. DATL is specifically for situations where there is a legitimate dispute about the tax itself, not because someone cannot afford to pay the balance. Need Tax Help Now? If you have questions about whether a Doubt as to Liability Offer in Compromise may apply to your situation, Timalyn invites you to send her an email or schedule a consultation through the Bowens Tax Solutions website. If you’d like to see if you’re a good fit to work with her to fight the IRS, you can book a consultation at: https://www.bowenstaxsolutions.com/ As we conclude Episode 84, we encourage you to connect with Timalyn on social media. You’ll be able to subscribe to this podcast on Spotify, Apple Podcasts, YouTube, and other podcast platforms. Remember, Timalyn Bowens is America’s Favorite EA, and she’s here to fill the tax literacy gap, one taxpayer at a time. Thanks for listening to today’s episode. For more information about tax relief options or filing your taxes, visit: https://www.bowenstaxsolutions.com/ If you have any feedback or suggestions for an upcoming episode topic, please submit them here https://www.americasfavoriteea.com/co... Disclaimer: This podcast is for informational and educational purposes only. It provides a framework and possible solutions for solving your tax problems, but it is not legally binding. Please consult your tax professional regarding your specific tax situation.