The Internal Revenue Service (IRS) and the State of California have Offer in Compromise (OIC) programs that allow qualified tax payers to pay a portion of the taxes owed. In addition, while your offer is under consideration, the IRS is prohibited from instituting any levies of your assets and wages. This means your bank levies and wage garnishments will stop!
This article will focus on the how the IRS Offer in Compromise program works, but the general principles apply to the State of California’s program as well.
What is an Offer in Compromise?
An Offer in Compromise is where a taxpayer shows to the IRS or other government agency that with their current financial situation it is not reasonable for the government to expect to receive more than what you are offering to resolve your debt. This agreement settles the taxpayer’s legal responsibility for what is owed to the government, for less than the amount originally owed. Once an OIC is accepted, the taxpayer will pay what they can afford, not what they owe.
How much will I have to offer?
To determine an offer amount you add up your surplus income that you can pay over 48 to 60 months added to the equity you have in all of your assets. The fair market value of your assets is based on a ‘quick sale’ value minus any encumbrance.
The lowest offer the IRS will accept is $20.00. YES, I said $20.00. The amount you owe does not figure into the calculation – only your future income potential and your assets. If you qualify you can wipe out thousands, yes HUNDREDS of thousands of dollars of tax debt starting as low as $20.00.
Are you an Offer in Compromise candidate?
Not everyone that owes taxes is a good candidate for an Offer in Compromise. The best way to determine if you qualify for an Offer in Compromise is to do a thorough analysis of your financial situation projected up to ten (10) years into the future. Sounds daunting? Well it is if you don’t know how to do a thorough long term analysis but many offers that are rejected could have been determined to be bad offers with a thorough review.
In the end it is up to you to decide if your offer is a good offer. If your financial situation shows that your offer would be $40,000 for a $50,000 tax debt that is not a good offer. BUT if your offer would be $40,000 to resolve $200,000 that is a good offer if you can fund your offer.
Call without delay to speak with our Folsom tax debt resolution lawyers to see if an Offer in Compromise would work for you by reviewing your case. An Offer in Compromise may allow you to settle back taxes or IRS liability at a substantial discount on the basis of doubt as to collectability, liability, or effective tax administration. If your assets are less than your debt, and you can not afford to make payments, our Sacramento Tax Debt Resolution Attorneys can eliminate your tax debt.
