Simply put, an Offer in Compromise is a deal between the IRS and a taxpayer or a business to settle all of their tax liability for a certain sum, to be paid in a certain way. But, Offers in Compromise can be very difficult to process and to get accepted. You need a skilled Tax Attorney to represent you to have realistic chances of success.
How much do I need to Offer the IRS to settle my tax liability?
The amount necessary to settle an Offer depends totally on how much the value of your equity in assets is, plus as much as the Internal Revenue Service believes they can get from your earnings over the next year. The following is a gross simplification of how we determine the amount of an OIC.
Asset Value is determined by finding out the quick sale value of assets, deducting the amount of any liens against the asset. The difference is the equity in the property.
Excess Income is calculated by determining how much income the taxpayer or business makes and then deducting what the Internal Revenue Service believes is a reasonable amount for living expenses.
How are Offers in Compromise processed by the IRS?
OIC’s are put together by your Tax Attorney. They require a great amount of paperwork to file. The IRS wants to see proof of all of your income, all of your expenses and the value of assets. Once the paperwork is put together, the Offer is submitted. Then, it sits at the IRS until it is assigned to an Offer Specialist. This may take the better part of a year. Once the Offer Specialist has it, they look it over and ask for updated financial information. Then they will contact your Attorney and the negotiating process will begin. The IRS does not just give the Offers away. They want to insure that they are getting the most money that they can from the Taxpayer.
Will my OIC get accepted?
The short answer is that whether an Offer gets accepted depends in part on your particular circumstances. If you qualify, it should be accepted. But, it also depends on the job your Tax Attorney does in representing you. Taxpayers should beware of who they hire. There are many unscrupulous outfits out there who will take the money and run. For information of some of them, see our website: Ripoff Warnings
Stay tuned for the next in our series on Offers in Compromise.