IRS can reject Offer In Compromise if taxpayer can afford to pay the full amount
Crawford Pile Driving, LLC v. Commissioner (U.S. Tax Court 2025) Offer-in-Compromise Rejection in CDP Review Summary
The Tax Court upheld the IRS’s levy and lien against Crawford Pile Driving, LLC after finding that the company could afford to pay its full tax debt. Appeals had rejected the company’s $111,077 settlement offer because updated financial records showed it could pay about $2.3 million, and the court agreed that was reasonable.
Holding
The Tax Court granted summary judgment for the IRS and upheld the levy and lien. Because the taxpayer did not challenge the underlying tax amounts at its first hearing, the court reviewed only whether Appeals followed the rules and acted reasonably. It found no abuse of discretion.
Appeals verified that all legal and procedural steps were met, considered the settlement offer, and reasonably rejected it after recalculating a much higher ability to pay based on 2023–2024 financial data.
The court agreed that the Appeals applied the correct standards and acted within its authority.
Why It Matters
Confirms that Appeals may reject a doubt-as-to-collectibility offer when updated financials show the taxpayer can fully pay through equity and future income.
Reinforces that failing to raise liability at the initial CDP hearing forecloses later liability challenges on review.
Highlights the impact of current compliance failures and incomplete financial documentation on eligibility for collection alternatives.
Underscores that courts will review CDP determinations for abuse of discretion and will not substitute their own judgment for Appeals’ when the record shows verification and reasoned application of IRM standards.
Timeline
2017–2018: Crawford Pile Driving, LLC files late employment and FUTA returns; IRS assesses tax, additions under § 6651(a)(1) and (a)(2), and § 6656 deposit penalties. As of Feb. 6, 2025: $44,558 due for Q3 2018 Form 941; $11,302 due for 2017 Form 940.
Nov. 19, 2020: IRS issues first Letter 1058 (levy) for the Form 941 liability.
Dec. 1, 2020: IRS files NFTL for the Form 941 liability and issues Letter 3172.
Mar. 17, 2021: IRS issues second Letter 1058 for the Form 940 liability.
Dec. 19, 2020 & Apr. 13, 2021: Company timely requests CDP hearings; seeks OIC, installment agreement, and currently not collectible; does not dispute underlying liabilities.
May–June 2021: Appeals conducts initial hearing; company submits a $500 OIC on doubt-as-to-collectibility; COIC later rejects for noncompliance (Jun. 29, 2022).
Jan.–Mar. 2023: On reassignment, SO calculates RCP at $111,077; the company amends OIC to $111,077 with a 20 percent down payment (Mar. 9, 2023).
May 12, 2023: Appeals rejects OIC because trust fund recovery penalties for some periods were not yet assessed.
May–Oct. 2024: IRS moves to remand after assessments post-OIC change; Tax Court grants remand for supplemental CDP.
Nov.–Dec. 2024: On supplemental hearing, updated 2023–2024 financials show significant profits and asset growth; Appeals recalculates RCP to $2,312,037 and proposes rejection of the $111,077 offer. The taxpayer does not submit the promised revised financials.
Jan. 15, 2025: Supplemental Notices of Determination issued, rejecting the OIC and sustaining both levies and the NFTL.
Nov. 4, 2025: Tax Court grants IRS summary judgment; appropriate decisions to be entered.
Key Facts
Taxpayer: Crawford Pile Driving, LLC, a Michigan family-owned business; owner: Todd A. Crawford.
Liabilities at issue: Employment tax (Form 941, 2018 Q3) and FUTA (Form 940, 2017), with additions under § 6651(a)(1) and (a)(2) and § 6656, plus interest.
Assessed balances as of Feb. 6, 2025: $44,558 (941 Q3 2018) and $11,302 (940 2017).
Initial OIC: $500 based on doubt as to collectibility; rejected by COIC for noncompliance.
Amended OIC: $111,077 after Appeals’ initial RCP calculation; 20 percent down payment made.
Updated financials: 2023 S corporation return showed $849,000 profit and $364,155 increase in asset values; 2024 YTD P&L (through October) showed $298,151 profit; Appeals computed RCP at $2,312,037 and concluded the liability was fully collectible via equity plus $29,816 per month for 60 months.
Procedural posture: Consolidated CDP cases (Nos. 8914-23L, 8980-23L); government moved for summary judgment; court reviewed for abuse of discretion.
Statutory or Regulatory Framework
§ 6320 and 6330 require the IRS to provide CDP rights before filing an NFTL or levying, and to consider issues raised by the taxpayer, including collection alternatives.
§ 6330(c)(2)(B) bars challenges to underlying liabilities in CDP if the taxpayer previously received a notice of deficiency or otherwise had a prior opportunity to dispute.
§ 7122 and Treas. Reg. § 301.7122-1 authorizes compromise of tax liabilities, including for doubt as to collectibility, and directs that offers based on collectibility should reflect reasonable collection potential.
IRM 5.8.4 provides guidelines for calculating RCP and instructs that offers substantially below RCP be rejected absent extraordinary circumstances.
Standard of review: Abuse of discretion applies when liability is not properly at issue. See Goza v. Commissioner and Pough v. Commissioner.
Arguments
Petitioner argued:
Appeals improperly rejected the amended $111,077 OIC without permitting a further amendment after IRS delays and changes in assessed periods.
Appeals failed to consider corrected assessments, applied credits, updated income information, and the company’s asserted inability to pay.
IRS argued:
The company did not dispute the underlying liabilities at the initial CDP hearing, so the review is limited to abuse of discretion.
The company was noncompliant when it first offered $500; COIC properly rejected that offer.
Updated 2023–2024 financial data established an RCP of about $2.31 million, far exceeding the $111,077 offer; under IRM and § 7122 standards, rejection was required.
The company did not propose a viable installment agreement and failed to supply the promised additional documentation.
Court’s Reasoning
Scope and standard: Because the company did not contest its underlying liabilities during the initial CDP hearing, the court reviewed the Appeals’ supplemental determination for abuse of discretion, not de novo.
Record review: The court accepted the administrative and supplemental records as complete; the taxpayer did not move to supplement.
Verification: Appeals verified legal and procedural requirements, satisfying § 6330(c)(1).
OIC analysis: Appeals calculated RCP using the company’s own updated financial submissions, which showed substantial 2023 profits and asset growth and positive 2024 results through October.
Guidelines applied: Appeals followed IRM guidance and controlling caselaw (including Murphy, Johnson, and Eichler) that an OIC based on doubt as to collectibility should not be accepted below RCP absent extraordinary circumstances.
No contrary evidence: After acknowledging the basis for rejection and promising additional data, the company did not provide adequate documentation to reduce RCP.
Other alternatives: Although the company mentioned an installment agreement earlier, it did not present a concrete proposal at the supplemental hearing; there was no abuse in declining an unproposed or unsupported alternative.
Balancing test: Appeals reasonably concluded that sustaining the levy and the NFTL balanced efficient collection with intrusiveness, given the absence of acceptable alternatives.
Forward-Looking Implications
Appeals will recalculate RCP using the most current verified financial information available at the time of decision; post-offer improvements in profitability can render earlier offer amounts inadequate.
Taxpayers pursuing doubt-as-to-collectibility offers should maintain full filing and deposit compliance and provide complete, timely financial statements; failure to do so may justify rejection.
Where the taxpayer does not properly dispute the underlying liability at the initial CDP hearing, later attempts to relitigate liability will be barred, and review will focus on procedural regularity and reasoned discretion.
Practitioners should prepare clients for the possibility that remand and updated assessments will reopen RCP, requiring higher offers or a feasible installment agreement to avoid enforced collection.
Result
The court granted the Commissioner’s motions for summary judgment and sustained the two levy notices and the filed Notice of Federal Tax Lien; the company’s offer in compromise was rejected correctly.
The Takeaway
In CDP cases, Appeals may reject a doubt-as-to-collectibility offer when verified financials show the ability to full-pay. Current compliance and complete, timely financial disclosure are necessary for settlement consideration; improved economic performance can defeat a previously viable offer.
List of Citations
I.R.C. § 6320; § 6330 — CDP procedures, verification, issues properly raised, and balancing test.
I.R.C. § 7122; Treas. Reg. § 301.7122-1 — Standards for compromise, including doubt as to collectibility and reasonable collection potential.
I.R.C. §§ 6651(a)(1), (a)(2); § 6656 — Additions to tax for failure to file, failure to pay, and failure to deposit.
Goza v. Commissioner, 114 T.C. 176 (2000) — Abuse-of-discretion review when liability not at issue in CDP.
Pough v. Commissioner, 135 T.C. 344 (2010) — Scope and standard of review in CDP cases.
Murphy v. Commissioner, 125 T.C. 301 (2005), aff’d, 469 F.3d 27 (1st Cir. 2006) — Reasonable collection potential and OIC standards.
Johnson v. Commissioner, 136 T.C. 475 (2011), aff’d, 502 F. App’x 1 (D.C. Cir. 2013) — Rejection of OIC where RCP exceeds offer.
Eichler v. Commissioner, 143 T.C. 30 (2014) — Deference to Appeals’ adherence to IRM guidelines.
Kelby v. Commissioner, 130 T.C. 79 (2008) — Effect of remand on scope of CDP review.
Giamelli v. Commissioner, 129 T.C. 107 (2007) — Issues not raised in CDP cannot be raised later.
Fla. Peach Corp. v. Commissioner, 90 T.C. 678 (1988); Celotex Corp. v. Catrett, 477 U.S. 317 (1986) — Summary judgment standards.
Hoyle v. Commissioner, 131 T.C. 197 (2008), supplemented, 136 T.C. 463 (2011) — Court’s review of verification requirement.
Gentile v. Commissioner, T.C. Memo. 2013-175 — No abuse for failing to accept an installment agreement not proposed.
Sullivan v. Commissioner, T.C. Memo. 2009-4 — Jurisdiction to review rejection of OIC covering CDP and non-CDP periods.