Assets to Always Claim as “Exempt” On An IRS Financial Statement (433A) Offer in Compromise

Assets to Always Claim as “Exempt” On An IRS Financial Statement (433A) Offer in Compromise

Internal Revenue Code section 6334(a) shields certain taxpayer assets from the IRS collection powers. Since these assets are beyond the reach of the IRS, it is important to remember to always exclude their value from Offer in Compromise.

Claim as “exempt” the following:

1. Tools of the trade or profession up to a specific amount. On Page 6, Item 59a (“Business Assets”) of the Form 433A OIC, the IRS requests itemization and valuation of business assets.  A specific amount of these types of assets are “exempt” under IRC 6334(a)(3).
2. Household goods and furniture up to a specific value. On Page 3, Item 19a (“Personal Assets”) of the Form 433A OIC, the IRS requests itemization and valuation of personal assets.  A specific amount of these type of assets are “exempt” under IRC 6334(a)(2).
3. Also, be sure to reduce asset values of other assets (cars, houses) at 80% of fair market value, pursuant to Internal Revenue Manual 5.15.1.16(2). This reduction is to arrive at the quick sale value, which is what the IRS uses to estimate the price for the asset if it were to be sold in a short period of time under a pressure to sell.

It is important to always claim these exemptions and reductions when submitting an Offer in Compromise to ensure the value offered is not overstated.

Should you get help?

I have seen many people try to prepare their own OIC and fail because they do not fully understand the art of dealing with the IRS. Yes, you can submit an Offer in Compromise yourself but if you are trying to considerably reduce your debt, I recommend you rethink your position.

An “accepted” OIC is not the same as a “successful” OIC.

There is more to it. Sure, the average taxpayer can fill out the forms and after spending hours reading and rereading the instructions provide the substantiation needed for an application to be accepted. How do you measure success? To me, success is measured with an approval on the LOWEST DOLLAR AMOUNT the IRS will accept.

If you feel that you may be in over your head, or just want to get a second opinion, let’s set up a short call.  To avoid the back and forth emails and phone tag, I have included a link to my Calendar https://calendly.com/taxman/tax-problem-resolution-initial-consultation.  Let’s set up a 30 min. phone conference to get to know each other.  The phone number to call is 855-829-5877 and my extension is 203.