Federal Tax Day - Current, J.2, IRS Did Not Abuse Discretion in Rejecting Offer-in-Compromise and Sustaining Lien (Crawford, TCM), (Jan 8, 2026)

The IRS did not abuse its discretion in rejecting an individual’s offer in compromise and sustaining the filing of a Notice of Federal Tax Lien. The Tax Court found that the Appeals Office reasonably concluded that the proposed offer did not reflect reasonable collection potential and that statutory and administrative requirements were satisfied.

The individual was assessed trust fund recovery penalties as a responsible person for unpaid employment taxes under Code Sec. 6672. The IRS issued Letter 1153 by certified mail to the last known address, advising of the proposed assessment and appeal rights. The assessment was valid as delivery was confirmed and no administrative protest was filed.

Following lien filing, a Collection Due Process hearing was requested under Code Sec. 6320. An offer in compromise was submitted based on doubt as to collectibility. The Appeals Office evaluated financial information and determined that income and asset equity demonstrated the ability to pay more than the amount offered. Requests for additional substantiation were made, but documentation provided was incomplete and unreliable.

T.A. Crawford, TC Memo. 2026-3, Dec. 62,803(M)