Of all the creditors you owe, the IRS is probably the most intimidating. Fortunately, there are often potential solutions that can help you resolve your tax problems without leaving you completely penniless. One such option is an offer in compromise. Before reaching a final settlement under this potential solution, it is important to understand how to negotiate your offer down to the lowest possible amount.
3 Deductions You May Be Entitled to With an Offer in Compromise
Before finalizing an offer in compromise, be aware of the following possible deductions:
- If your car is over six years old and has over 75,000 miles on it, the IRS will subtract $200 from your monthly cash flow. This can be done for up to two vehicles per household. Ultimately, this may reduce the value of your settlement by up to $4,800.
- If you use your car for work, the IRS allows you to take up to $3,450 off the value of your vehicle when calculating the offer in compromise.
- The IRS guidelines require the agency to allow taxpayers to subtract one month’s living expenses to reduce their cash on hand or in a bank account. It is important to note, however, that the living expenses must be considered reasonable and tuition payments are not allowable expenses. This is a crucial allowance that can significantly reduce the value of a taxpayer’s offer in compromise. For example, if you have $5,000 cash in a bank account, and your monthly living expenses equal that same amount, you may potentially omit the entire value from your settlement.
Check Out More OIC Tips Here: 10 Things to Stop Doing to Your Offer in Compromise
To obtain the best possible solution to your unpaid tax debt, it is important to have an experienced attorney in your corner. We have helped many taxpayers resolve their tax issues successfully. Learn more about their experiences by checking out our client testimonials today.