Can an IRS Offer in Compromise save me money?
We've heard this question asked of us in many different ways – "How much should I offer the IRS?", "How much money you can save me?", or "What percentage should I offer to pay the IRS?" If you deal with anyone who promises you'll only pay a specific amount or guarantees a specific outcome, be wary.
Many people are surprised to learn that it is possible to successfully negotiate with the IRS. An Offer in Compromise is an IRS tool that allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship.
Paying less to the IRS with an Offer in Compromise is NOT always good thing
Betty came to us long after she should have. She began dealing directly with the IRS in 2006 to solve her tax debt and it snowballed into something much larger. She owed the IRS about $200,000, but she also had some assets in the form of investment properties. An IRS Revenue Officer paid her a visit one day and told her that she had to sell those houses right away to pay the IRS. Betty didn't think of hiring an attorney or asking the Revenue Officer if there was any other way to handle this tax debt. She thought,"Well, what are you gonna do? You've got to pay the IRS, right?" and sold the houses and paid the IRS.
During that time she still had other liabilities that she had to file and when she filed her 2006 tax return she had a huge capital gain; this resulted in her owing another $100,000. The IRS Revenue Officer didn't care – he was fine taking everything she had to solve that current tax liability and move her case off his desk. Eventually we were able to work with the IRS to get her tax debt reduced, but only because she had nothing left to give. We could have worked with the IRS right from the start to handle the case in a different manner and save her 10 years worth of headaches and worry.
Every big tax problem starts small
If you're in a situation where you have a tax debt with the IRS, an Offer in Compromise may be the best option for you. Be realistic in your expectations; the IRS is going to look at your ability to pay based on income, expenses, and asset equity. Include detailed documentation when applying as the easier you make it for the IRS the more likely they are to accept your offer. It also surprises people when they learn that it's not just a numbers game when it comes to an IRS Offer in Compromise; take the time to tell them your whole story.
The one thing you shouldn't do is ignore the problem. The penalties and interest that can accrue on tax debts can cause your snowball of a liability to become an avalanche. And remember, with any tax debt the real question you want to ask is, "How can you make my tax problem go away forever?" Your goal shouldn't just be to fix the tax problem you currently have, but to also ensure you're set up for a successful future and never have to deal with the IRS again.
If you have a tax issue and are unsure what option is the best for you, contact us to schedule a free, confidential consultation. We can help you decide on the best strategy for your particular case. Call us at 888-727-8796 or email email@example.com.