How does one qualify for an Offer in Compromise?

I guess this is the most asked question and rightfully so because to qualify could make the difference of paying what IRS claims you owe and saving you thousands of dollars. The national average of acceptance of an Offer ranges any where from 13%-15% which means a savings of up to 87% off of what you owe to the IRS! That is the greatest thing since sliced bread but they don’t make it easy either. One the first things that factor into you qualifying is your debt to income ratio, in other words, they take the total (gross) monthly income of the household then they look at the monthly expenses which does not include all bills that come in monthly. They must be ones that are necessary for the health and welfare of you or your family or for the production of income.

In other words, items such as cable or Internet will not count unless you can prove that it is a necessity for your livelihood and/or needed for your business, otherwise it is counted as a “luxury”. Your credit cards bills also will not count because IRS believes that they should be first on the food chain and is not counted because it is counted as a unsecured debt. Hold on, there are more things that won’t count like tuition for private schools, public or private college expenses, charitable contributions, deposits to 401(k) plans, etc. etc. Check with a tax professional to ask the right questions to see what expenses that you may have that the IRS has deemed as “acceptable”. But in a nutshell, rent or mortgage, food and clothing, car payments, child support, the taxes on your income, medical insurance and co-pays for medication and/or visits to the doctor, utilities, child care, any court mandated costs and business expenses are solid expenses, anything else would depend individually.

Please note this, to qualify for an “offer”, you will have to prove your income as well as your expenses, you word will not be enough! There are other factors as well like if you have any liquid assets like stocks, bonds, 401ks, land, property (other the one you’re living in). You can have a house and still qualify but it need to have very little or no equity for you to qualify. Bottom-line, if you are living check to check and barely getting by and can prove that, there is a very good chance you will qualify for an “offer”. It is advisable to talk with a tax professional because within 30 minutes he should be able to tell you if you qualify or not unless there are are things that you didn’t mention or neglected to inform him during the consultation so be honest.

Tax Resolutions firms such as Premier Tax Resolutions do not work for the IRS, we work for you, therefore it is our job to get the best “offer” possible. And also know that the final word comes from the IRS regardless of the result. It is a lot like being charged with murder; you know you will not represent yourself, you will need a firm with the expertise and experience to give you a better chance of winning, to present your case fully and thoroughly but in the end, it is the judge or the jury that has the last word so make sure you give that firm all the correct and accurate information that is needed to “win” and save you thousands and finally give you some piece of mind. Stop losing sleep over that tax debt and final do something about it.