STJ Diana L. (“Sidewalks of New York”) Leyden explores the OIC equivalent of the whistleblower rejection-or-denial dichotomy (for which see my blogpost “Rejection and Denial” 3/16/20) in Donald M. Zorn & Cynthia A. Zorn, Docket No. 15833-23L, filed 8/3/26.

TAS told the Zorns their OIC had been rejected, but their IRS account transcript showed “481 Offer in Compromise rejected or returned.” Order, at p. 4. IRS also claimed the Zorns hadn’t filed a return for one of the years at issue; they claim they did, but Cynthia couldn’t sign it because she was ill. 

If COIC returns an OIC, it means the offer was processable, but stuff is missing or incomplete. Rejected is the COIC version of NYC’s “fuggedaboutit.” If rejected, one can resubmit or go to Appeals and petition an adverse NOD.

The Zorns were paying as if the OIC had been accepted, and if it was rejected they should have a hearing at Appeals. Rejection is separate from any COIC determination, hence a hearing. If returned, the Zorns are required to be told the reason, but they get no hearing on why it was returned.

The admin record as supplemented and with materials supplied in an IRS status report looks like a frittata Fiorentino, so STJ Di sends it back to Appeals to unscramble.

Was the OIC “(1) rejected, as stated in the Taxpayer Advocate Service letter, and if so whether the Appeals Officer made an independent final determination, and whether petitioners should be permitted to submit a revised OIC; or (2) returned and whether the subsequent filing of the 2016 tax return required the Appeals Officer to send it back to COIC to reconsider if the offer should have been returned.” Order, at p. 4.