When you have an unpaid tax debt, you may want to consider an Offer in Compromise as a solution to your problem. An Offer in Compromise is an agreement between a taxpayer and the IRS to settle your tax liability for payment of less than the full amount owed. Offers are typically accepted by the IRS when it seems unlikely that the full amount can be paid back. To be successful, however, it is crucial that you make an offer that the IRS will consider reasonable.
How to Calculate the Amount to Offer in Your OIC
Calculating an Offer in Compromise can be tricky for those not familiar with IRS rules and procedures. Our experienced tax attorneys can help walk you through this process to ensure that you offer the appropriate amount. Generally, however, there are three different types of Offers that you can submit (depending on the payment structure that would work best in your situation), and each type of offer is calculated slightly differently:
Calculate the offer by taking your monthly disposable income, listed on IRS Form 433-A, multiplying it by 48, and adding it together with all of your assets. For example, assets may include the equity in your home, your cars, and vacation properties. This amount equals the amount that you should use for your Offer in Compromise. A cash offer is due within 90 days of processing. Currently, the time it takes to process this type of offer is approximately 6 months. The advantage to you, as the taxpayer, is that you have the 6 months plus an additional 90 days before you have to make payment. In turn, the IRS is happy to receive cash offers since they are receiving a lump sum.
Short-Term Deferred Offer
Calculate the offer by taking your monthly disposable income, multiplying it by 60, and adding it together with your assets. This amount equals your offer amount, which should then be divided by 24. Your payments will be made in 24 monthly installments instead of in one lump sum.
Long-Term Deferred Offer
Calculate the offer by taking your monthly disposable income, multiplying it by the number of months you have left under the longest possible Collection Statute Expiration Date, and adding it together with your assets. This amount equals your Offer in Compromise figure. That number is then payable over the number of months that you have left under the CSED.
Making a reasonable offer is critical to save you both time and money. Even if you have already tried of an Offer an Compromise and been denied, all hope is not lost. We can assist you in pursuing an appeal. We encourage you to learn more about the experiences of our past clients by checking out our client testimonials today.