Tax Debt Solutions Blog

Tax Relief: Offer In Compromise

 digg it |   delicious |   StumbleUpon |  reddit 

Offer In Compromise: What Amount Should You Offer?

Your offer must be the same as your realistic value of assets and the sum of money that could be taken from potential earnings.  Possible value of assets is what could be collected if the IRS levy assets immediately and sell them same day after debts, such as mortgage.  The IRS concedes a QSV (Quick Sale Value) i.e. twenty percent beneath fair market value.

Most domestic property, appliances, furniture and clothing aren’t regarded as luxuries.  Items such as valuable antiques or mink coats must be separately listed.   Include retirement plans balances with assets.  Penalties and income tax for premature allocation subsequent to cashing in may be discounted.  Certain property can’t be levied or seized.

Deduct essential living costs from total monthly income to get an approximate future income.  The outcome is disposable income and the minimum must be about the same as your monthly payment if granted by the IRS.  Disposable Income number must be multiplied by a number dependent on type of payment plan.  There are three plans: Cash Offer, Short Term Deferred and Deferred Offer.

Unique Conditions:  Efficient Tax Administration

You may have too many assets even with a minimum total.  If selling those assets were to instigate economic hardship, the IRS may take less than asked for under normal regulations.  Selling a home or cashing in retirement plans could cause hardship.

The IRS favors certain individuals:

• Older than sixty in dire financial straits
• With psychological or physical conditions
• With HIV
• With drug addiction or alcoholism
• Those related to addicts or alcoholics causing financial hardship

The above must be proved by financial or medical records and information.  With Forms 656 and 433, include a letter detailing your problems.