Settling with the IRS: What’s Really Important to Getting an Offer in Compromise?

Pennies on the Dollar? Making a Deal with the IRS? You've Heard the Jingles on TV and Radio, BUT what really is important to qualifying for an Offer in Compromise with the IRS?

In our 30 plus year history, we've seen a lot of approaches, deceptive and otherwise, towards "selling" an Offer in Compromise, but what gets truly overlooked are the following key questions:

1. Can you pay your taxes off before they expire? Back taxes expire ten years after they've been assessed. The date of your most recent tax debt is the most important date to consider for your Offer. For example, if you just filed 2021 and owe $50,000.00 that debt should expire in May 2032 roughly or in 120 months. IF you divide that $50,000 by 120 months that equals $417 a month. If you have LESS than $417 in monthly disposable income after considering the IRS standards/limits, then you pass the first test for qualifying.

2. Do you have the assets to pay what you owe? If your net worth exceeds what you owe then usually that disqualifies from you from an OIC. However, IRAs and 401ks can be valued at 60%. Houses at 80%. And even if you have the home equity to pay off the IRS, you still MIGHT qualify if you can show you can't get access to the equity by getting two loan denials.

3. Are you current on your recent taxes? Ready to be current on taxes for the next five years? Getting an Offer in Compromise with the IRS means promising to pay your current and future taxes. If you are self-employed that can be tricky. Ready to get current on taxes for the year that you are in or prepare to roll in your unpaid recent taxes into a future Offer in Compromise?

4. But what if you DON'T qualify for an Offer in Compromise? You might try a penalty abatement! A first time abatement of penalties can often be lucrative with little effort. "Reasonable cause" penalty waiver will require a letter and documentation of your circumstances. Or maybe you can run out of the clock? Taxes do expire in ten years. Let us check for you.

You can reach our tax experts directly by calling or emailing:
Portrait of Jay Freeborne
Jay Freeborne
Enrolled Agent and Tax Resolution and Compliance Expert
(866) 525-7302 or [email protected]
Portrait of Stephanie Johnston
Stephanie Johnston
Enrolled Agent, Tax Resolution & Expat Expert
(866) 525-7321 or [email protected]

Is 2024 the year to solve your tax issue? WATAX is ready to assist you now. Please call us at 1-888-282-4697 or email us a description of your tax issue and we'll contact you promptly.

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