When clients contact us with tax problems, one of the most frequent questions we hear is: “can we settle with the IRS for less than we owe?” or “can we just pay the tax and have the penalties and interest forgiven?”
The simple answer is that if you qualify for an Offer in Compromise, then yes, you can settle for what you can afford to pay, rather than what you owe. Other than an OIC, the only relief will be Penalty Abatement, where the penalties are forgiven.
In order to settle for what you can afford to pay in an Offer, you must qualify. It has become more and more difficult with the current Internal Revenue Service climate. The current focus in on collection of past due taxes rather than helping delinquent taxpayers.
But, even now, if you qualify, you may be able to settle for only a fraction of what you owe. The Offer in Compromise program may let you settle for what you can afford to pay rather than what you owe.
Generally, the IRS wants what they believe they would be able to collect from you over the next 5 years. They will evaluate the value of all of your assets, except your household items and what tools or other items you need to make a living. Then they will deduct the loans against y our home, vehicles or other items of value. The amount of value in your property is the first part of what you will be required to pay to the IRS.
Then they will look at your future earning capacity. They will calculate how much you will be able to earn and deduct what they consider to be reasonable living expenses. The difference is what they could expect to collect from you. They will want the excess income multiplied by either 48 or 60 depending on whether you are making a cash offer or an offer where you pay them over 2 years.
About 90% of offers that are filed by individuals without the help of a tax professional who knows offers in Compromise inside and out are rejected. You definitely need a Tax Attorney to help with your OIC.
At Martelle Law Offices we have handled many, many Offers in Compromise for our clients. We can give you a free consultation and an analysis of whether an OIC will help you. Just click here to contact us for a FREE evaluation!