Offer in Compromise (IRS Tax Representation)

There are plenty of instances where we may be able to negotiate a settlement of the tax debt for much less than the full amount. This procedure is referred to as an offer in compromise.

An offer in compromise is literally an offer you make to the IRS to settle your debt for less than what you actually owe. In reviewing your offer, the IRS will consider multiple factors, including the liquidation value of your non-exempt assets and also the excess income you have to pay your existing debt.

(Here is a brief clip on our offer in compromise representation services.)

At Huddleston Tax CPAs, our professionals have the expertise to guide you through the offer in compromise process and produce the best possible result. Our team has a thorough understanding of how the IRS calculates the value of your tax debt and so we can utilize this understanding to develop the best strategy for you. Perhaps you already have a tax lien or an IRS levy in place to collect past tax debt; or maybe you are simply struggling to pay off your debt. Whatever your particular situation, if you owe upwards of $10,000 to the IRS we can provide the assistance you need.

Categories

Offers in compromise fall into one of three categories. These categories are:

  • Cash offers
  • Short-term deferred payment offers, and
  • Deferred payment offers (which, in turn, have three distinct payment options)

No matter which category your offer in compromise falls into, the IRS will expect the offer to include the so-called “quick sale value” of your assets. Typically, the quick sale value is 80 percent of the fair market value, but the quick sale value can vary depending on the particular type of asset. Real estate owners should bear in mind that a quick sale will eliminate much of the equity you have in your asset (i.e. your home).

IRS Expectations

Offer Compromise Tax Debt IRS Settlement

Tax Debt

Your offer must reflect your excess income to a certain degree. The term “excess income” is defined as income which is still available after reasonable living expenses are deducted from your net income. The IRS will make a determination on your offer by examining both your tax debt and your excess income. The particular category of your offer in compromise will also impact the IRS’s determination.

If you make a cash offer, the IRS will expect an offer which includes 48 months of your excess income. If you make a short-term deferred payment offer, the IRS will expect an offer which reflects 60 months of your excess income. The full payment would occur later than 90 days but within 2 years of the IRS’s acceptance of your offer in compromise. If you make a deferred payment offer, the amount in your offer will be equal to your monthly excess income multiplied by the number of months remaining on the collection statute. Though there can be exceptions, the statute of limitations for collection on your tax debt is 10 years from the date the debt was assessed.

Under the right circumstances, an offer in compromise may be a very wise choice. If the net value of your assets do not exceed your total debt, depending on your excess income, an offer in compromise can result in substantial savings.

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Huddleston Tax CPAs of Seattle & Bellevue
Certified Public Accountants Focused on Small Business

(800) 376-1785
40 Lake Bellevue Suite 100, Bellevue, WA 98005

Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Mercer Island, West Seattle, Auburn, Snohomish, Mukilteo, Seatac, Des Moines, Woodinville, Edmonds, Sammamish and Issaquah. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Lance Hulbert, CPA, Grace Lee-Choi, CPA, Jennifer Zhou, CPA, or Jessica Chisholm, CPA. Member WSCPA.