Tax attorney Roni Deutch has written an open letter to the Internal Revenue Service criticizing the agency's offer in compromise program, which is supposed to help taxpayers settle their debts.

The letter came in response to a recent questionnaire from the IRS asking recipients how satisfied they were with the program. Deutch described several objections that she and other attorneys at her firm share. The firm has been helping taxpayers settle their debts with the IRS for 17 years.

Deutch noted that she had sent a similar list of suggested improvements in December 2005, the last time the IRS sent out a questionnaire to taxpayers and tax professionals about the OIC program, but the IRS essentially ignored them.

"In those three years, the IRS has done nothing to act upon our requests," wrote Deutch. "Thus, I resubmit these requests to you for consideration and action."

One of her criticisms is that the IRS is not doing an adequate review of its Effective Tax Administration offers in compromise. "There are not enough sufficiently trained employees at the IRS to review and accept ETA OICs," she wrote. "When an ETA OIC is filed, the taxpayer states that 'I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair and inequitable.'"

However, she complained that oftentimes the ETA OICs are filed and are immediately rejected with a determination that the taxpayer has sufficient equity to fully pay their taxes. "There is no review into the facts and circumstances of the taxpayer's particular situation, and the OIC is rejected, forcing the taxpayer to file an appeal and to go through the appeals process," wrote Deutch. "A better review process for ETA OICs is needed."

The IRS announced this week that it is beginning to test two new programs that provide taxpayers with post-appeals mediation and arbitration procedures for offer in compromise and trust fund recovery penalty cases (see IRS Introduces Two Appeals Programs).

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