Why An Offer In Compromise Won’t Work For You

December 28, 2011 by  Filed under: Taxes 

You hear the ads on the radio and see them on TV – they’re as prevalent as the personal injury attorney ads. An authoritative figure or voice promises that you’re income tax debt can be cut to pennies on the dollar, saving you and your family from financial ruin and embarrassment. The commercial always have the same feel to them visually – lots of red, white and blue, eagles, and seals looking just like some government agency with a three-letter acronym. You may receive the same type of solicitation by mail if you already have a tax lien filed against you.

Hopefully you perform some due diligence before you send these firms the last $5,000 to your name, either in cash or God forbid, credit card.

Here are the most common reasons why your situation will not qualify for an Offer in Compromise (OIC), and why you should go grab that check out of the mail:

1. You have assets that can be liquidated to pay your tax debt. The most common of assets is the retirement account of some sort that can be liquidated, even with an additional tax cost. Your OIC application will be turned down if you do not include the liquidation in your offer.

2. The IRS considers household income, not just the taxpayer’s income. This is common in situations where a tax liability occurred prior to marriage or in the case of domestic partners. Again, too much household income disqualifies you from the OIC program.

3. The IRS is more excited about your job prospects than you are! In other words, they believe you can get a job if you are unemployed, or that you will receive substantial pay increases over the next ten years that will allow you to liquidate you debt.

4. The IRS’s table of expenses is much lower than what you actually spend. And, the IRS has very little sympathy that you kids attend a private school or need an expensive after school care program; or those expenses like sports fees or cell phones are not needed if you expect the IRS to cut down on the amount of taxes you owe.

So basically, unless you have some truly catastrophic happen in your life and you are on the verge of being homeless, with no assets left out of a bankruptcy, then you may qualify for an OIC. Otherwise don’t bother.

The more logical approach is to file an appeal or request for due process hearing and try to convince the appeals officer of your ability to pay. Or, you may even try to obtain a modest installment agreement on your own. There is no magic bullet to reduce your taxes. Use a professional to asset you, but be realistic about the prospects. The good news is that the IRS is willing to work with individuals to pay their taxes.

San Antonio attorney Martin Cantu invites you to visit his website, http://cantulegal.com/, for more information on how to obtain the legal help you need.

(c) Copyright Martin Cantu – All rights reserved.

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