This Morning I gave a quick talk about the pros and cons of Tax Debt Settlements, otherwise known as "Offer in Compromise". No matter where I speak, I keep hearing the "Pennies on the Dollar" and "Settling Tax Debt is Easy" mantras. I feel compelled to dispel these rumors with the cold hard facts.
Qualifying for an Offer in Compromise requires a thorough investigation
It's incredibly difficult to qualify for an Offer in Compromise. The IRS will perform an incredibly thorough investigation. This is the most thorough financial background check that is performed by the IRS. They won't sacrifice thousands without exceptional cause! Here's a few things they consider:
Can you pay the debt in full before the statutes run out? If the IRS determines you can pay the debt before the statutes run out, your Offer will not be approved.
Projected Income Potential: You may be unemployed now, but you could be making $100K when you find work again next year. The IRS will look at the income you've made before and consider the income you'll make it in the future when you apply for an Offer in Compromise. This means you can be broke now, but still have to pay!
Assets and Savings: The IRS will determine the market value for any assets you have. This includes everything, including your home and car. When you receive your Offer in Compromise rejection letter you'll see the IRS's determination that you can pay the debt in full (or more than the debt amount!) and they will list each asset and it's market value. If you're living big without paying the IRS, expect to pay big. (Sorry, John Karoly Jr.)
But there's hope If there is no way you could pay your tax debt in full before the statutes run out, the IRS may allow you to settle. If you think you qualify, work with a reliable Tax Resolution Professional to make sure that you do not put yourself into a worse situation. With help, you could Settle your Tax Debt and save thousands. My team can help you figure out if this is the best tax resolution for you or if there are better options.