It can be exciting when a prospect comes in for an initial consultation and they are the perfect candidate for an Offer in Compromise (OIC).  They hire you for exactly that to prepare, submit and negotiate an OIC.  Many months go by between when you take on a new client and when it’s time to submit the offer.  As months pass, the client’s situation can change.  A change in their current financial situation, such as a salary increase or business income increase, or even an increase in the FMV of their primary residence, now means they are not eligible for an OIC.  (Keep in mind that only 30-35% of your clients will qualify for an OIC because there are stringent requirements to be eligible. As a result, most of your clients are going to be Installment Agreement (IA), Partial Pay Installment Agreement, Innocent Spouse Relief and Currently Not Collectible (CNC) clients.)  Additionally, you cannot control what the IRS does or does not do.  What should you do if the original plan to resolve your client’s tax debt through an Offer In Compromise is not feasible any longer? There are certain actions steps to take to help you avoid unhappy clients, complaints and refund requests if the Offer In Compromise is no longer a viable resolution option.

During the initial consultation with a prospect, you must tell the prospect that you cannot guarantee the outcome of the (any) case.  You cannot ensure what dollar amount you are going to settle the case for. You cannot guarantee the IRS will accept the offer. The IRS could reject or return it.  In other words, you can’t guarantee results. You must make it clear that the IRS is the final arbiter.  The IRS has the last word.  If they do not accept your client’s offer there are other collection alternatives available.  These other options must be included in your engagement letter.

Your engagement letter should include a description of the services to be performed as well as what you plan to do if the Offer In Compromise fails.  Your engagement letter should inform the client that you will prepare, submit and negotiate an Offer In Compromise OR (and that’s the keyword here) you will do Installment Agreement, Partial-Pay Installment Agreement AND Penalty Abatement. Adding the word OR makes a big difference.  It lets your clients know that one path to resolution might not work and there are other paths they can take to resolve their tax debt.  The engagement letter communicates what your clients can expect throughout the course of their case. This way if the client does not qualify for an Offer in Compromise, the client doesn't get upset. They know at the beginning that the Offer In Compromise is not guaranteed.  They are prepared for an Installment Agreement and/or Penalty Abatement. Now you and your client are on the same page about what the next steps are.  They are not upset and asking for a refund because you told them this could happen, and you put it in writing- “I have a plan if the Offer In Compromise does not work out.  We are going prepare, submit and negotiate an Installment Agreement and a Penalty Abatement. request”

Remember if plan “A” does not work out you have plan “B” in your hip-pocket.  You need to clearly communicate this to your prospect.  There are always bumps in the road to resolution but knowing what some of them can be and preparing your client for them reassures your client they are in good hands.

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