When you owe tax debt to the Internal Revenue Service (IRS), it is difficult to focus on much else. The IRS is one creditor, perhaps above all others, that must be taken very seriously. Fortunately, there are alternative solutions available to many taxpayers for the tax debts that they owe. One such example is known as an Offer in Compromise. This solution involves reaching a compromise with the IRS to settle your tax liability for an amount that's less than the full amount that you owe. Not everyone is going to be eligible for an OIC, but if you can demonstrate that you would be unable to pay the full amount in the time the IRS has to collect from you, you may be able to settle for a compromised amount.
Pre-Qualifying for an Offer in Compromise
If this solution sounds appealing to you, an excellent first step is to fill out the IRS's pre-qualification questionnaire. The first step in the pre-qualification is to answer the following questions:
- Are you currently in the middle of a bankruptcy proceeding?
- Have you filed all of your tax returns and made your required estimated tax payments?
- If you're self-employeed, have you submitted all your estimated quarterly tax deposits?
The second step to pre-qualifying is to gather some basic information including where you live, the number of people in your household, and how much tax liability you currently owe to the IRS You'll also need to outline all your available assets, such as:
- Checkings, savings, and money market accounts
- The market value of your home, as well as any available equity
- The value of your retirement accounts
- The value of any stocks, bonds, and other investments that you own.
The final step is evaluating your household income. This includes your wages, interest and dividend income, and all other forms of income that you receive. Once this information is entered, you will need to outline your typical monthly household expenses. After completing this section of the pre-qualifier, you will be told whether or not you may qualify for an offer in compromise based on the information that you provided.
Even if the answer is “no,” all hope is not lost. If you do not qualify under the traditional test, there are certain exceptional circumstances that may allow you to pursue this form of solution to your tax debt. Our experienced tax attorneys are standing by to help walk you through this process.
9 Signs You May Be a Good Candidate for an OIC
The IRS's pre-qualifier tool is a great place to start, but it certainly doesn&rsqu;t tell the whole story about the IRS process. Regardless of what the pre-qualifier says, here are 9 signs that you may be a good candidate for an OIC:
- You truly have an inability to pay the full amount that you owe.
- Your monthly expenses far exceed your income.
- You have very little in the way of equity in your assets. For example, if you own a home but owe nearly as much to your lender as your home is worth, you have very little equity in the property.
- You are current with all to-date tax filings.
- You are current with all tax debt owed to the IRS.
- You are not currently involved in a bankruptcy proceeding.
- You are prepared to meet all the terms outlined in your Offer, should it be accepted.
- Paying your tax debt in full would create a significant financial hardship for you and your family.
- The amount that you are offering truly represents the most that the IRS can reasonably expect to receive from you.
If you answered “yes” to some or all of the above statements, we strongly encourage you to consider pursuing an Offer in Compromise for your tax liabilities. At a minimum, learn more about the alternative solutions to your tax debt problems that may be available. Download our free guide, The Ultimate Survival Guide for IRS Problems to learn more, or call us today at 800-721-7054 for a free, no-obligation consultation.