Many out there in "tax relief-land" want to portray the Offer in Compromise program as this mysterious thing that only "they" - accountants and/or attorneys hold the key to. In fact, getting a settlement with the IRS is NOT super difficult to comprehend: if you can pay back what you owe the IRS before the debt expires, you are NOT getting a settlement. If you can't pay it back, you might be a candidate (if you ALSO meet the asset test described below). Let's illustrate it thru five questions:
What do you owe the IRS? How much do you owe the IRS thru the end of the current year (if you aren't current on taxes). For our example, let's say you owe $100,000.
When does the tax debt expire? When does your most recent tax debt expire? If you owe for 2016, you add ten years to the processing date. So 2016 usually expires in May 2027 if filed on time. So today in October 2017, 2016 will expire in 115 months.
Do the basic math: using our example: $100,000 divided by 115 months equals: $869 month. If you can demonstrate an inability to pay more than $869 month (after IRS allowable standards are met), you might be a candidate.
Do you meet the asset test? Your home equity is calculated as 80% of house minus mortgage. There are exclusions for the value of cars and household goods. Any other assets? 401ks (80% value), stocks/bonds (90%). If you can pay the debt with an EASY liquidation of your assets, you are NOT getting an Offer. However, if you can't borrow against equity in a house, for example, you might be able to exclude that equity.
What's your Offer going to be? Let's say you did the basic math above and could only pay $500.00. And your assets above are all excludable - then you would multiply that 500 by 12 months to get your Offer. $6000 on $100,000 sounds pretty darn good!