Is Getting My Tax Return Back Hopeless

[judgediatl2]

Ohio

I worked with a tax agent to file an offer in compromise for a previous year's tax debt back in 2021. It was signed and excepted in May of last year. The fine print said that I'd be losing the current year's tax return one more time before I'd start receiving them again. However, this paperwork was in process since 2020 and was delayed due to no fault of my own. Also, they changed the law in November of the same year, that the IRS would no longer seize tax returns due to outstanding debts.

I asked my rep if an exception could be made in our case, since it was delayed until 2021 due to internal factors, and then the law was changed just a few months later. She was nice about it, but didn't think there was any use to appeal. Because there was no way she knew to appeal it.

So before I just give up, is there someone or somewhere at the IRS I can petition to and see if they'll be reasonable and release the return this year instead of next? I know that might be a stretch, but I would at least like to try. Even if it's a shot in the dark.

 

[adjusterjack]

Are you talking about a refund? The return is what you file. The refund is what you get back.

There was a way to avoid getting the refund seized. If you know your refund is at risk, adjust your W-4 withholding so you don't get a refund. Either break even or owe a little.

 

[Taxing Matters]

So before I just give up, is there someone or somewhere at the IRS I can petition to and see if they'll be reasonable and release the return this year instead of next?

The answer to that is no. The law never changed. What did change in November of last year is that the National Taxpayer Advocate (NTA) and the IRS negotiated a change in IRS offer in compromise (OIC) policy regarding refunds received in the year the OIC is accepted by the IRS. The policy used to be that any refund you get during the calendar year that the OIC is accepted is retained by the IRS and not refunded. That provision is included in the terms you agreed to when you signed the Form 656, which the OIC request form. The exact terms of the agreement between IRS and NTA on this issue states: "Procedural Change: The applicable IRM sections and terms of the Form 656 will be updated to remove the refund recoupment requirement after the offer acceptance date. This change will be effective for offers accepted on or after November 1, 2021." (Bolding added). What this means is that the IRS will still keep refunds issued before the date the OIC is accepted, but for OICs accepted after November 1, 2012 it will no longer offset refunds due to be received AFTER the date the OIC was accepted.

Your problem is that your OIC was accepted in May 2021. That's before the effective change date for the new policy so it does not apply to your case. So any refunds you received during 2021 would still get offset to your liabilities as you agreed to when you submitted your Form 656.

 

[judgediatl2]

Yes, all valid points. But I'm dealing with this after the fact. My question was if there is some internal department I can "appeal" to to see if they'd consider making an exception. This was also delayed into 2021 because the agent had me refile due to a clerical error on his part. So technically, not 100% our fault. We've been doing our diligence since 2019.

I know this is a waste of time to even try, as the IRS will probably just say no. But it's worth at least taking a shot. If I only knew where.

 

[Taxing Matters]

My question was if there is some internal department I can "appeal" to to see if they'd consider making an exception.

The IRS does not make exceptions for this kind of thing. It applies the statutes, regulations and other official guidance of the IRS. Here, the IRS will apply the rule that was in the Form 656 that you signed as that OIC was approved before the change was made.

This was also delayed into 2021 because the agent had me refile due to a clerical error on his part. So technically, not 100% our fault. We've been doing our diligence since 2019.

Then you might get a positive response from the IRS for its error/delay. Form 843 is the closest form that would fit for that. Or you could make the request in a letter to the Service Center providing all the needed information.

You could also try contacting the taxpayer advocate for help.

I know this is a waste of time to even try, as the IRS will probably just say no.

Yes, I'd say it's quite a long shot to succeed with this. But you can try it anyway if you want.

 

[LdiJ]

Are you talking about a refund? The return is what you file. The refund is what you get back.

There was a way to avoid getting the refund seized. If you know your refund is at risk, adjust your W-4 withholding so you don't get a refund. Either break even or owe a little.

I would like to emphasize the bolded. As a tax professional I have seen more confusion arise out of someone calling a refund a return than you can possibly imagine. Therefore I correct people every chance I get.

 

[Bali Hai Again]

Are you talking about a refund? The return is what you file. The refund is what you get back.

There was a way to avoid getting the refund seized. If you know your refund is at risk, adjust your W-4 withholding so you don't get a refund. Either break even or owe a little.

Great advice! Around tax time each year I hear colleagues, friends and others bragging about how much tax refund they are going to get. As if they got it over on Uncle Sam. (Well they say, I look at it as money in the bank). The fact is that they let the government use their money throughout the year interest free! With the technology today if people watch closely and with little effort they can follow your advice being close to break even +/-. In the past it was much more difficult.

 

[LdiJ]

Great advice! Around tax time each year I hear colleagues, friends and others bragging about how much tax refund they are going to get. As if they got it over on Uncle Sam. (Well they say, I look at it as money in the bank). The fact is that they let the government use their money throughout the year interest free! With the technology today if people watch closely and with little effort they can follow your advice being close to break even +/-. In the past it was much more difficult.

That works for single people with no children or married people with a bit higher income and/or no children. For medium to lower income people with children it is impossible to plan things for break even, because so many of the credits available to those people are refundable credits. They can have zero withholding and still get considerable amounts of refunds.

 

[Bali Hai Again]

That works for single people with no children or married people with a bit higher income and/or no children. For medium to lower income people with children it is impossible to plan things for break even, because so many of the credits available to those people are refundable credits. They can have zero withholding and still get considerable amounts of refunds.

The people who lack the flexibility to plan to break even of course don't have that option. The people that I'm referring to that do have that flexibility should do it. In fact if planned without incurring IRS penalties you can owe the government at the end of the year and use their (everyone's) money all year long.

 

[Taxing Matters]

In fact if planned without incurring IRS penalties you can owe the government at the end of the year and use their (everyone's) money all year long.

(Bolding added). It's not the government's money until you send it to the government. You are just not sending it any earlier than absolutely necessary. So what you are using is YOUR money to invest.

 

[Bali Hai Again]

(Bolding added). It's not the government's money until you send it to the government. You are just not sending it any earlier than absolutely necessary. So what you are using is YOUR money to invest.

I understand. Good point!