Making a compromise bid is a great way to significantly reduce your tax arrears with the Internal Revenue Service. However it is not as simple as just filling out a few forms. To be successful with Offer in Compromise, you must plan ahead and pay close attention to the details.
The first step to being successful is to actually determine if you qualify under the program. I know this sounds simple enough but to determine your eligibility is not a simple matter. Because it can take more than 20 hours to determine if they qualify under the program.
To determine whether you qualify, you may need to complete IRS Forms 433 or 433-A, and these forms can be very time consuming. This form will require you to disclose all of your financial information. This includes all your bank account information such as the name, address and account numbers of all your bank accounts. In addition, you must provide quarterly reports on each account.
You must also disclose information about your vehicle such as VIN Number, fair market value and your car loan balance. In addition, if you own real estate, you must also disclose the fair market value of your real estate and your home mortgage balance.
This is just a sample of the information the Internal Revenue Service should provide them with to determine whether you qualify for the Offering in Compromise Program.
But before you make an offer to the tax authorities, you should know whether you qualify or not as there are steps you can take to qualify.
As an example, let’s take John Smith who owes the government $25,000 in back taxes. John does own a house or have any investments, but he has $23,000 in a savings account and a 10-year-old vehicle that covers 128,000 miles. If John had only made an offer to the IRS with the information above, they would not have accepted the offer and taken the full $23,000 from John’s bank account.
However, before making an offer, John bought a new vehicle for $30,000 using $23,000 in his savings account and took out a $7,000 car loan. This would allow John to protect most of his assets from bids in the compromise calculations and John would be a more favorable candidate for approval into the OIC.
Preparing a successful bid in a compromise is very time consuming and technical in nature. If you have tax arrears with the IRS and want to resolve it by making an Offer, then you should seek professional help from an experienced professional like the author of this article.