by Jay Freeborne , Enrolled Agent
March 22, 2013

Most people who fall behind on their IRS debts also owe State income tax as well. While this is daunting: there is a silver lining in owing the State too:

Your state payments are allowed when calculating an IRS - Offer in Compromise!

For example: if you set up a $300 payment plan with the State - for the most part and with few exceptions -- the IRS will allow that in your calculation of your Offer in Compromise settlement.

How much money is it worth to your IRS Offer? Well every $100 of disposable income reduced translates into $1200 in reduction of your Offer. So a $300 payment plan should reduce your Offer by $3600.00. Now all of this is assuming that you do have some disposable income left over to pay the State. If you don't have any disposable income - you might need to make a settlement with the State as well.

We have blogged heavily about the Offer in Compromise program and the 2012 rule changes in our 6 part series which starts here:

Offer in Compromise Rule Changes for 2012: Biggest Ever - Part I of a 6 Part Series

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

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