Journal of
Accounting and Taxation

  • Abbreviation: J. Account. Taxation
  • Language: English
  • ISSN: 2141-6664
  • DOI: 10.5897/JAT
  • Start Year: 2009
  • Published Articles: 183

Full Length Research Paper

Practices for negotiating tax debts successfully: Exploration of offer in compromise judicial tax court case decisions

Lloyd Cynthia B.
  • Lloyd Cynthia B.
  • Department of Accounting, Marilyn Davies College of Business, University of Houston – Downtown, Shea Street Building 320 North Main Street, Suite 410F, 77002 Houston, Texas, United States.
  • Google Scholar
Wadhwa Darshan
  • Wadhwa Darshan
  • Department of Accounting, Marilyn Davies College of Business, University of Houston – Downtown, Shea Street Building 320 North Main Street, Suite 410F, 77002 Houston, Texas, United States.
  • Google Scholar


  •  Received: 25 April 2022
  •  Accepted: 23 August 2022
  •  Published: 30 September 2022

Abstract

Settling tax debts with the U.S. Internal Revenue Service (IRS) as a service to accounting clients is categorized among the high-level negotiations skills widely sought from accounting graduates by employers. Through purposive sampling and analysis of 272 federal tax court cases decided between 2004 and 2021, this paper proposes to elucidate effective tax debt negotiations techniques. Judicially accepted and rejected offers in compromise (OICs) that were appealed to tax court, but not necessarily setting precedent, provide a natural environment for observing pre-court and post-court negotiations and settlements with the IRS. It was found that IRS appeals officers and judges (adjudicators) primarily base OIC case rejections, and thus failed negotiations, on deficiencies in written evidence, procedural failure, and on inapposite reasoning. Deficiencies in written evidence and procedure typically result in the adjudicators granting a “redo’s” and pathways to acceptance, whereas without the requisite case-specific analysis to match each unique set of facts, deficiencies in reasoning result in outright OIC rejections.  In analyzing a narrow line of OIC tax court cases for the stated reasons for acceptance and rejection at both the IRS office of appeals and at the tax court level, valuable insights are gleaned into the fundamentals for successful OIC’s.

 

Key words: Compromise, tax, appeals, US Supreme Court.