October 25, 2015 by Jay Freeborne

Do you have a debt with the IRS that you can't afford to pay back? Getting hounded with letters from IRS? Not sure what to do? Read this list carefully before filing an IRS Offer in Compromise (OIC).

1. Why Filing a Losing Offer in Compromise is a Bad Idea. You want to make sure that you qualify for an Offer in Compromise before filing one with the IRS. Why? Because the six month to 12 month processing time "freezes" the Statute of Limitations clock with the IRS. That's precious time that might come in handy if you are stuck owing the debt.

2. Offers in Compromise aren't based on what you owe. Advertising indicating that you can "settle" your debt for "pennies on the dollar" is misguided. There has never been a "percentage" that the IRS is willing to settle for. If you owe $1,000,000 or $10,000, it all depends on your ability to pay the debt back.

3. Why the 2012 Offer Rule Changes Are Revolutionary. We have been posting videos and blog posts galore on the 2012 OIC changes for months now. The most revolutionary thing about it? The 48 month (disposable income) rule was reduced to 12 months - that's a 75% discount! In the most basic summary: if your disposable income is $400 you are now required to pay only $4800 in your Offer instead of $19,200 in the previous rules. That is a big difference!

4. Filed Offers Stop the Collection Process. If you are getting IRS collection notices, filing your Offer in Compromise in a timely manner will shut off levies and garnishments. This solves two problems with one stone: A. Stopping Collections without having to call IRS (computer freezes collections). B. Beginning the important process of settling your debt with an Offer in Compromise.

5. Payments for State back taxes are now allowed. Previously State back tax payments weren't factored for Offer in Compromises. That was pretty lame. Now with the rule changes in 2012, the IRS smartly allowed for State Back tax payments to be allowed when calculating an OIC.

6. "Dissipated" Assets are considered. If you liquidated an IRA, gave away a ton of money to your nephew, or blew a sizable asset before filing an Offer - it might come into play. Generally, the IRS is looking at assets that were "dissipated" in the previous three years.

7. Why the Expiration Date of your Taxes (CSED) Means Everything to your OIC. There is a lot of factors in determining whether you qualify for an Offer. But finding out the CSED (collection statute of expiration date) of your most recent tax liability is a crucial first step! If you owe taxes in 2014, well - it's pretty easy - your taxes won't expire until 2025 - that's 10 years. In essence, if you can pay back the IRS debt before the debt expires you WON'T qualify for an OIC. You can read more about that CSED'S importance here and watch a video TOO.

8. Make sure you have paid your Current taxes and plan to pay your taxes going forward. If you owe taxes in the current year, you want to make sure that you file your Offer to include those taxes. If it is the end of the year, you might want to postpone filing your Offer until the new year strikes. Once your Offer is accepted and paid, you will have to file and pay your taxes for the next five years to be in compliance.

Washington Tax Services files Offer in Compromises daily for our clients that qualify. Please contact our Staff  NOW at 1-888-282-4697 to discuss how we can resolve your tax problem. If you are reading this in the middle-of-the-night, please EMAIL us HERE and we'll contact you during normal hours. Talk soon! Staff of Washington Tax Services, solving tax problems since 1989. 

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