Five Ways to Lower the Amount of Your Offer in Compromise

Five Ways to Lower the Amount of Your Offer in Compromise

Being successful in an Offer in Compromise settlement depends on how much you know about IRS settlement guidelines. An Offer in Compromise is a negotiation – you must raise any special points which are particular to your situation.

Here are five pointers to lower the value of your Offer in Compromise:

1. Make sure you DO NOT claim property the IRS cannot take from you as “exempt” on your IRS financial statement (Form 433A-OIC). Exempt assets the IRS cannot take include certain types of everyday belongings in your house (Internal Revenue Code 6334(a)). It also includes certain tools from your business. A specific value of these assets should not be included in the value of what you Offer the IRS.
2. Use the possibility of bankruptcy as leverage. Internal Revenue Manual 5.8.5.6(5) allows the IRS to consider the impact of a possible bankruptcy on the value of a compromise. If your taxes are eligible to be discharged in bankruptcy, the IRS could get nothing if you chose that route over an Offer in Compromise. Make sure you know how to use that leverage to get an Offer in Compromise and avoid bankruptcy.
3. Know how to properly utilize IRS living expense guidelines. For example, if your car is over six years old or has over 100,000 miles, the IRS can allow a $200 monthly replacement cost. See Internal Revenue Manual 5.8.5.22.3(6). Make sure you know the IRS guidelines in an offer in compromise and how to maximize the amount the IRS will allow you.
4. Understand how to properly reduce the value of your property to quick sale value. Start with what it would sell for at resale – that is fair market value. IRS guidelines permit you to reduce fair market value by 20% to arrive a quick sale value. There are other ways to reduce the value of these assets more, but that requires more experience. Make sure you take the “quick sale value” reduction for your property on a house, car, and other assets.
5. You may have income the IRS cannot take. If you do, request it be excluded from Offer calculations. The IRS cannot seize workers compensation, unemployment benefits, supplemental social security for the disabled, blind, or aged and service-connected disability benefits (Veterans). If they cannot levy it, then it should not be considered as an income source.

There are many factors that play a part in an Offer in Compromise negotiation.  The more knowledge you have about the IRS settlement process, the better.

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.