The LTR 4112C means the IRS returned your Offer in Compromise without considering it on the merits. This is different from a rejection. A rejection (LTR 686C) means the IRS evaluated your offer and said no. A return means the IRS couldn't even evaluate it because something was missing or deficient.
Common Reasons for Return
The most common reason is missing or incomplete financial documentation. The IRS requires complete Forms 433-A (OIC) and/or 433-B (OIC) with supporting documentation including bank statements, pay stubs, asset valuations, and expense verification. Missing any of these can result in a return.
Other common reasons include unfiled tax returns (you must be current on all filing obligations before submitting an offer), missing the application fee ($205, waived for low-income applicants), insufficient initial payment (20% for lump sum offers or the first monthly payment for periodic payment offers), and submitting the offer while a bankruptcy case is pending.
The Difference Between Return and Rejection
A returned offer has no appeal rights. You can't appeal a return to the Office of Appeals the way you can appeal a rejection. However, you can immediately resubmit a corrected offer with the deficiency cured. The good news is that a return doesn't count as a rejection, so there's no negative impact on future offers.
A rejection, by contrast, gives you 30 days to appeal. If you miss the appeal deadline, you must start the entire process over.
How to Resubmit
Read the LTR 4112C carefully. It identifies the specific deficiency that caused the return. Cure that deficiency and resubmit. If it was missing documentation, provide it. If it was unfiled returns, file them first. If it was an incomplete 433-A, complete it fully.
You'll need to pay the application fee again and make a new initial payment. The clock on the offer process starts over, so expect another 6 to 12 months for consideration.
If your offer was returned and you need help resubmitting, call us at (813) 229-7100. We submit OICs regularly and know what causes returns.