Can’t afford to pay your tax debt? An IRS Offer in Compromise could be your lifeline. However, trying to navigate the process on your own can cost you both time and money.
With the help of an experienced Offer in Compromise attorney, you can significantly reduce your tax debt. We’ve helped many clients pay just a small fraction of their bill!
Why Choose an OIC Attorney from Gordon Law Group?
Contact us online or call (312) 471-0126 to schedule your free consultation!
Call Our Offer in Compromise Attorneys to See If You Qualify
An IRS Offer in Compromise is one way to find tax debt relief. The first step is to call our experienced attorneys for a confidential consultation. We’ll help you determine whether you qualify for an Offer in Compromise or whether another solution will provide your best results.
We know how hopeless it can feel to have IRS debt, but there is a solution. Your experienced Offer in Compromise attorney will provide the clarity, guidance, and personal service needed to bring you safely to the other side.
Understanding the Offer in Compromise Process
Through the Offer in Compromise program established by the Internal Revenue Service (IRS), you may qualify to settle your IRS tax debt at a substantial discount. If your assets are less than your debt and you cannot afford to make payments, Gordon Law Group’s tax attorneys may be able to eliminate a large portion of your tax debt. Once your attorney files your offer, the IRS is prohibited from collecting from you. This means your bank levies and wage garnishments will stop.
Most people do not have the skills or knowledge of the IRS collection process to negotiate IRS compromise settlement agreements that are in their best interests. Government figures show that 75% of Offers in Compromise are returned due to forms being filled out incorrectly—and of the offers that are processed, approximately 50% are rejected.
Qualifying for an IRS Offer in Compromise based on doubt as to collectability is based on your monthly income and expenses, assets, and economic hardship conditions. Your tax attorney will personally analyze and prepare the financial statements because a strong presentation and accounting is the key to success in the OIC program. In addition, your lawyer will personally handle ALL negotiations and communications with the IRS. Gordon Law Group offers uniquely professional, responsive, and experienced representation to resolve your tax matters.
1. Offer in Compromise Qualification
Do you owe more than $30,000 to the IRS? Are your assets less than your tax debt? Is your income insufficient to make significant monthly payments on the total existing liability to the IRS? If you answered yes to these questions, you may meet the Offer in Compromise requirements.
Call (312) 471-0126 for a free consultation with an experienced tax attorney! OIC qualification is complicated, but we make the entire process simple.
2. Analyze Your Tax Records
After filing the Power of Attorney (Form 2848) with the Internal Revenue Service, your Gordon Law Group attorney may request a copy of your account transcript and determine if the IRS made any errors.
Your attorney will also research whether there is any basis for Doubt as to Liability, Special Circumstances, or expiring Statute of Limitations that would support an even lower IRS Offer in Compromise amount. Your attorney will then discuss their findings with you and find a minimum offer amount that works.
3. Complete Any Unfiled Tax Returns
Before you are eligible for an Offer in Compromise, you must file ALL missing tax returns. Gordon Law Group’s skilled tax professionals can prepare and file them based on IRS records and the information you provide.
For more information and costs of preparing delinquent tax returns, contact Gordon Law Group today.
4. File the IRS Offer in Compromise
Upon receipt and processing of your Offer in Compromise, the IRS suspends all collection activity while your OIC is being considered. Usually, 4 to 8 weeks thereafter, the IRS confirms that the Offer in Compromise was properly submitted and that it will be assigned to an agent for review.
Usually within 3 to 6 months of being assigned, a Revenue Officer will contact Gordon Law Group. You will not need to have any contact with the IRS yourself.
While the request for an Offer in Compromise is being processed, our tax attorneys will keep you up to date so you don’t have to worry about a thing!
5. Corresponding with IRS and Providing Supporting Documentation
The IRS examiner will typically request certain updated documentation to support the Offer in Compromise, which your Gordon Law Group attorney will request from you.
Prior to submitting any documentation to the examiner, your attorney will carefully screen it to make sure it is consistent with what was previously reported. Sometimes the examiner will determine that the offered amount must be higher, but with further negotiation and presentation of additional information, it is common to get the examiner to agree with Gordon Law Group’s Offer in Compromise amount.
6. Acceptance of Offer in Compromise and Reduction of Tax Debt!
After receiving payment, the IRS writes off the balance of the liability and releases all tax liens. Once your Offer in Compromise is accepted, your tax debt is reduced and you can breathe a sigh of relief!
How Much Should I Offer in Compromise to the IRS?
That’s the million-dollar question! The IRS uses a very strict formula to determine how much (or how little) you can pay with an OIC. The IRS will reject your offer if it doesn’t follow the rules. Did you know the IRS rejects 50% of the Offers in Compromise that it processes?
To help your chances of success, we highly recommend hiring an experienced Offer in Compromise attorney to make the process simple. We’ll fight for your lowest possible settlement! Call (312) 471-0126 now for a free consultation.
With that being said, here’s a basic overview of how to calculate your Offer in Compromise amount.
It all comes down to one basic idea: You want to find out how much money/assets you have available to pay your IRS debt. If that amount is less than what you owe (and you meet the other Offer in Compromise requirements), then your offer will likely be accepted.
There are 2 basic Offer in Compromise formulas:
- On a 5-month repayment plan: (Available Monthly Income x 12) + Value of Personal Assets
- On a 24-month repayment plan: (Available Monthly Income x 24) + Value of Personal Assets
Read on to learn how to calculate your Available Monthly Income and Value of Personal Assets so you can determine your Offer in Compromise amount!
Calculating Available Monthly Income for an Offer in Compromise
Monthly Income – Monthly Expenses = Available Monthly Income. In other words, what you’ll have in your pocket each month that can be applied toward your IRS balance.
Here are some of the things that count as income:
- Net business income (if you’re a business owner)
- Distributions from an account, such as a retirement account
- Social Security payments
- Child support
For the full list, see IRS Form 433-A, Section 5: Monthly Income and Expenses.
Let’s say that you add it all up and your monthly income comes out to $1,500.
Now, you need to calculate your monthly expenses. These include (but are not limited to):
- Housing and utilities
- Car payments and maintenance costs
- Out-of-pocket medical coverage
- Food, clothing, and misc.
- Current year income taxes
Let’s say your monthly expenses come out to $1,400.
$1,500 of Monthly Income – $1,400 of Monthly Expenses = $100 of Available Monthly Income… But not so fast! For each category of expenses, the IRS has pre-set caps on how much can be claimed.
Using our previous example, let’s say that your monthly expenses are actually $1,400, but the IRS will only allow you to claim $1,200.
$1,500 of Monthly Income – $1,200 of Allowable Monthly Expenses = $300 of Available Monthly Income to pay off your debt.
As you can guess, this calculation gets complicated. Perhaps your eyes are already glazing over and your mind is drifting toward tonight’s dinner plans.
If that’s the case, don’t worry; our experienced Chicago tax attorneys can help. In fact, we may be able to negotiate exceptions to the IRS’s strict formula so that you can pay less! Contact us today to get OIC help from our experienced tax attorneys.
Calculating Personal Assets for an Offer in Compromise
When calculating your collection potential, the IRS isn’t just looking at your paychecks and other income; the agency wants to know about all your financial assets. This includes property, vehicles, cryptocurrency, stocks and bonds, furniture, jewelry, collectibles, and more.
In addition to your income and expenses, Form 433-A asks for a list of your assets with the current market value for each.
For our example formula, let’s say that your Personal Assets amount to $5,000.
Offer in Compromise Formula: 5-Month Repayment (Lump Sum)
For a 5-month repayment plan, use this formula to determine your total Offer in Compromise amount:
(Available Monthly Income x 12) + Value of Personal Assets
Using the numbers from the examples above, the formula would look like this:
($300 x 12) + $5,000 = $8,600
On a 5-month repayment plan, you must pay 20% of your offer amount with the application. So in this example, you would pay $1,720 upfront and have 5 months (beginning when the offer is accepted) to repay the remaining $6,880.
If you have the funds to cover it, your debt to the IRS can be settled in just 5 months, and you’ll save thousands of dollars in the long run!
However, not everyone can afford to pay off their debt so quickly.
Offer in Compromise Formula: 24-Month Repayment
For a 24-month repayment plan, use this formula to determine what you should offer in your Offer in Compromise:
(Available Monthly Income x 24) + Value of Personal Assets
Using the numbers from the examples above, the formula would look like this:
($300 x 24) + $5,000 = $12,200
With a 24-month repayment plan, there’s no upfront payment required. Your monthly payment would be just over $500, and your outstanding IRS bill would be repaid within 2 years of your Offer in Compromise being accepted.