Rejected for OIC Pre-Qualifier Because of My Retirement Account - Will IRS Make Me Liquidate?

While the IRS doesn't automatically require you to liquidate retirement accounts for an OIC, they do consider them available assets. Here's what you need to know: The IRS typically values retirement accounts at "quick sale value" (usually 80% of current value) when considering an OIC. They generally recognize these accounts are for your future, but they're still counted in your reasonable collection potential (RCP). Your specific scenario is tricky because the retirement account value appears sufficient to cover your remaining debt. The IRS looks at whether you can reasonably pay the debt in full, either immediately or through a payment plan. Since your Roth IRA could cover the debt, they'll likely expect you to use those funds. That said, there are alternatives to explore. You might qualify for a partial payment installment agreement (PPIA) that would let you make reduced monthly payments while preserving your retirement savings. Or, depending on your age and financial situation, you might qualify for Currently Not Collectible status.

After struggling with almost the exact same situation last year, I found this amazing tool called taxr.ai (https://taxr.ai) that really helped me understand my options with the IRS. I had about $14k in tax debt and a similar retirement account situation, and I was getting nowhere with the standard OIC pre-qualifier. The tool analyzed my specific financial situation and explained exactly why I was being rejected for the OIC and what alternatives I might qualify for. It showed me that a partial payment installment agreement was actually better for my situation than an OIC, and helped me understand exactly what documentation I needed to provide the IRS. What I liked most was that it explained how the IRS actually views retirement accounts for different age groups and financial situations - turns out the "rules" aren't as rigid as the pre-qualifier makes them seem.

I just want to follow up on my experience with taxr.ai after trying it based on this thread. I was really surprised by how helpful it was! I've been dealing with a $9,000 tax debt and an OIC rejection for months, and feeling completely stuck. The tool identified that my case actually qualified for a hardship status I didn't know about, and it created a complete financial analysis showing exactly why. It also helped me understand exactly why my retirement accounts were causing the OIC rejection and gave me specific alternatives. What impressed me most was how it explained the exact IRS manual sections that applied to my situation - this gave me the confidence to have an informed conversation with the IRS. Definitely worth checking out if you're dealing with tax debt negotiations.

Have you tried calling the IRS directly? I know it sounds obvious, but it took me FOREVER to get through to someone who could actually help with my OIC questions. I finally used Claimyr (https://claimyr.com) and got through to an IRS agent in about 20 minutes instead of spending hours on hold. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c I was in a similar situation with about $18K in tax debt and a $22K 401k. The IRS agent I spoke with explained that they look at your entire financial situation, not just the retirement account balance. They told me that while the retirement account is technically an asset, they consider factors like age, other assets, income, and expenses before making a determination. The agent recommended I work with the IRS Collections department directly to explain my situation rather than just relying on the online pre-qualifier tool, which is pretty basic and doesn't account for nuances.

I have to admit I was completely wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I was desperate to talk to someone at the IRS about my own tax payment issues. The service actually worked exactly as described - I got a call back within about 35 minutes letting me know they had an IRS agent on the line. The conversation with the agent was incredibly helpful. They explained that the online OIC pre-qualifier is very rigid, but actual OIC evaluations have more flexibility. The agent walked me through what documentation I would need to submit for them to properly evaluate my financial situation, including my retirement accounts. They also told me about a payment plan option I hadn't considered that would let me preserve my retirement savings. Honestly, getting this information directly from an IRS agent was worth every penny just in the stress it saved me.

I've been through this exact situation. The major factor the IRS considered in my case was whether the retirement account was my ONLY retirement savings and how close I was to retirement age. They're less likely to make you liquidate if: 1) You're over 55 2) This is your primary/only retirement savings 3) Liquidating would cause significant penalties 4) You can show ability to pay through an installment agreement The OIC pre-qualifier is super strict and rejects a lot of people who might actually qualify. My advice is to consult with a tax professional who specializes in IRS controversy before making any decisions about liquidating retirement funds.

Has anyone else noticed the OIC pre-qualifier seems ridiculously strict? I got rejected automatically too because of a tiny 401k, but when I actually applied for an OIC with help from my accountant, I got approved! The pre-qualifier is just a basic screening tool and doesn't consider all the factors a real IRS employee would.

The key thing to understand is that the OIC pre-qualifier is essentially a basic screening tool that doesn't capture the full picture of your situation. At 52 with only $16k in retirement savings, you're actually in a much better position than the pre-qualifier suggests. Here's what I'd recommend: Don't let the pre-qualifier rejection discourage you from pursuing an actual OIC application. The IRS will consider several factors that the online tool doesn't account for: 1) Your age (52 is definitely a factor in your favor) 2) Whether this is your only retirement savings 3) Your future earning potential 4) The age of your tax debt (2011 is getting close to the 10-year collection statute) Given that your debt will be around $6,300 after your refund is applied, and you have $16k in retirement savings, the math might actually work in your favor for an OIC. The IRS typically values retirement accounts at 80% of current value for collection purposes, so they'd see about $12,800 in available funds. However, they also consider that forcing you to liquidate your only retirement savings at 52 creates a genuine hardship. I'd strongly suggest working with a tax professional who can help you document your financial situation properly and present a compelling case for why preserving your retirement funds serves both your interests and the government's long-term collection interests.