Filing an offer in compromise is an excellent way to significantly reduce your delinquent taxes with the Internal Revenue Service. However it is not as simply as just filing out a few forms. To be successful with an Offer in Compromise you must plan ahead and pay close attention to the details.
The first step in being successful is to actually determine if you qualify under this program. I know that this sounds simply enough but to determine your eligibility is no simple matter. As it can take an individual over 20 hours to determine if they simply qualify under the program.
To determine if you qualify you may have to complete IRS Form 433 or 433-A, and these forms can be very time consuming. These forms will requires that you disclose all of your financial information. This includes all of your bank account information such as names, addresses and account numbers of all of your bank accounts. In addition you must provide three months statements on each account.
You will also have to disclose information on your vehicles such as VIN Number, fair market value and the balance of your auto loan. In addition if you own any real estate you will also have to disclose the fair market value of your real estate and the balance of your house mortgage.
This is just a sample of the information that has to be provided to the Internal Revenue Service that they will use to determine if you even qualify for the Offer in Compromise Program.
However before you submit an offer to the taxing authorities you should know if you even qualify or not because there are steps that you can take in order to qualify.
For example, lets take John Smith who owes the government $25,000 in back taxes. John does own a house or have any investments but he does have $23,000 in a savings account and a 10 year old vehicle that has a 128,000 miles on it. If John were to simply submit an offer to the IRS with the above information they would not approve the offer and take the full $23,000 from John's bank account.
However if before submitting the offer, John purchased a new vehicle for $30,000 by using the $23,000 in his savings account and taking out an auto loan for $7,000. This would allow John to shelter a large percentage of his asset from the offer in compromise calculation and John would be a more favorable candidate to be approved for an OIC.
Preparing a successful offer in compromise is extremely time consuming and technical in nature. If you have delinquent taxes with the IRS and want to settle by making an Offer, then you should seek the professional assistance of an experienced professional such as the author of this article.