by Jay Freeborne , Enrolled Agent
October 6, 2014

If you have had the misfortune of owing the IRS for recent years, the timing of the resolution of your tax problem can be everything. October is particularly a good month to have a tax problem:

Why is October a good tax resolution month?

1. If you file an extension, your tax return for 2013 is due on October 15th, 2014. While you should have paid off what you owe on April 15th, technically, this new debt when assessed will cancel your installment agreement with the IRS for older years and possibly force a re-evaluation of the resolution of your case. This re-evaluation of your tax problem could mean you qualify for an Offer in Compromise. How? More tax debt can push some people into the Offer in Compromise program - as we'll illustrate below.

2. If you haven't paid into the system for 2014 - well October is near the end of the year. If we can keep the IRS at bay until January 2015 - well - we can also include unpaid taxes for 2014 to your overall debt and make a possible settlement of everything.

Case Example:

Client doesn't qualify for Offer in Compromise in Summer of 2014. But he will in Spring 2015!

Client owes the IRS $26,008 for tax years 2012 and 2013.

This tax debt has about 10 years left on the clock or 120 months as the most recent debt 2013 - was assessed after the return was filed in August 2014 - (add ten years and that is August 2024).

Most important question for Offer in Compromise Qualifiers:

At his/her current level of income, can client pay tax debt off before it expires?

$26,008 divided by 120 months is $216 per month.

Our client has $300 in disposable income a month (using IRS calculations and allowables): therefore he does NOT qualify for an Offer in Compromise right now as that would pay back the IRS.

However - next year when his debt will increase to $40,000.00. It will take $333 payments to pay that back. But notice his disposable income is $300 -- he is below! He qualifies.

$300 multiplied by 12 months is $3600.00. Next year - he could qualify for an Offer! Pretty cool, huh?!

Here's our 3 part series on the Offer in Compromise Law Changes that occurred in 2012: Offer in Compromise Rule Changes - a Big Deal!

For 30 years, WATAX has been solving every kind of tax problem. Call us at 1-888-282-4697 or email us a description of your tax issue and we'll contact you.

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