Innovative Strategies For Winning Tax Controversies, Business Structuring And Estate Planning

Do-it-yourselfer loses US Tax Court case for offer in compromise

by | Jan 3, 2020 | Taxation

Instead of hiring a tax lawyer to help him fight the IRS, Matthew Banks decided that a simple Google search is good as a tax law degree! The US Tax Court disagrees and kicked out his appeal when the IRS denied his requested offer in compromise. In Banks v Commissioner (here is the full citation: Michael Banks argued that since his income was low the IRS should grant an offer in compromise even though his assets exceeded the amount due. The IRS said that it did not matter whether his income was high or low since his assets were more than enough to pay the IRS they were not going  to release his liability under the theory of “doubt as to the ability to pay.”

The IRS has the ability to compromise an outstanding liability (issue an offer in compromise) under the following grounds:

  1. Doubt as to liability,
  2. Doubt as to collectibility, and
  3. Promotion of effective tax administration

Since he had the ability to pay if you liquidated enough assets, he did not qualify under “doubt as to liability.” If he would have had a good tax lawyer there could have been several approaches to lessen the amount he would have to pay the IRS.