How is Income Factored into an Offer in Compromise? A Columbus Tax Attorney Explains

An offer in compromise can be a very favorable way to resolve a tax liability with the IRS but not every taxpayer is able to settle their tax debt with the IRS given their financial circumstances. That being said, how does a taxpayer’s income impact an offer in compromise? An offer in compromise is primarily determined by a taxpayers equity in assets and income. Thus, income plays a major factor in whether or not the IRS will accept an offer from a taxpayer, and how much the offer will be to settle the tax debt. For an individual taxpayer, total household income is taken against total allowable expenses to calculate a taxpayer’s disposable income. The IRS factors a taxpayer’s disposable income into the offer equation and even more importantly will consider how much the IRS could collect over the course of the collection statute if the taxpayer made monthly payments in the amount of their disposable income to the IRS. If you owe taxes to the IRS and are considering submitting an offer in compromise to the IRS to resolve the tax debt, it is advisable to speak with an experienced tax attorney. A tax attorney can review your facts and circumstances to determine whether an offer in compromise is a viable option and what offer amount should be submitted to the IRS. An offer in compromise tolls the collection statute before the IRS and if a taxpayer has little to no chance of having the offer accepted, an offer may not be the best resolution choice to pursue with the IRS. You can speak with a Columbus tax attorney at The McGuire Law Firm to discuss whether or not an offer in compromise would be a viable option to resolve your tax debts with the IRS.

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