An offer in compromise is where you cut a deal with the IRS. You may have heard of ‘pennies on the dollar,’ that’s what an offer in compromise refers to. An offer in compromise is based on many different factors; your age, your health, your income, your assets, your liabilities. The IRS is going to look at a 99 year old guy with a terminal illness far differently than someone who just graduated from medical school. And so the IRS looks at your income and your expenses to see if you can pay the liability in full. If you can pay the liability in full, you are not eligible for an Offer in Compromise. If you can’t ever pay the liability in full, then you are eligible for a Offer in Compromise. Once you cross the threshold into eligibility, the focus is no longer in what you owe anymore, it could be $10thousand or $10million, it doesn’t matter. If you are eligible, the focus is on your ability to pay and that is unique only to you.
The IRS considers has something called national standards, kind of like a budget. you are entitled to a car, housing, utilities, but if your housing, utilities and care are higher than the national average, then the IRS disallows the difference for purpose of mathematical calculations.
If you take a look at the form, you can fill it out pretty quickly. Check the boxes and you can file an offer in minutes. We offer pre-offer planning. We take a look at income and expenses and make suggestions to make a Offer in Compromise more attractive to the IRS. Once the Offer has been accepted, the terms and conditions of the offer require you to be a good taxpayer for 5 years. So, if you continue to have tax problems, the IRS will tear up your Offer in Compromise and those old liabilities will again be your responsibility.
When I was at the IRS, I was the guy that said yes or no to all the Offers in Compromise. We’ve been doing offers here at our office for 24 years now and been very successful program. So, if you’d like to file an Offer in Compromise, give us a call.