When you have a tax debt with the IRS, one option to resolve the issue is an Offer in Compromise (OIC). An OIC is available to you if you’re unable to pay your entire tax debt or if paying it would cause you undue financial hardship. If the IRS approves your OIC request, you can pay off your tax debt for less than the actual amount you owe.
Bankruptcy and Installment Payments
If you’re currently involved in an open bankruptcy proceeding, haven’t made all required estimated payments, or haven’t filed all required tax returns, you won’t be eligible for OIC. Similarly, if you could pay off your tax debt on an installment plan, the IRS is unlikely to approve your OIC application.
Similarly, lacking cash assets to pay your tax debt doesn’t mean you qualify for OIC. The IRS considers all your financial assets as part of the OIC process.
OICs and Financial Analysis
Each OIC application will undergo a financial analysis. One of the first steps of this analysis is whether you can pay via installment agreements. If the IRS believes you can pay your total tax debt via installment agreements without creating an undue financial burden, they’re unlikely to approve your OIC request.
As part of your OIC application, you’ll submit a list of your assets. This includes foreign assets. The IRS may run a credit check to verify your assets or research the extent of your foreign assets.
The IRS will consider all types of assets, not just cash on hand or your income. Types of assets the IRS may consider:
- All income sources
- Real property
- Bank accounts
- Retirement accounts
- Life insurance statements
- Cars, motorcycles, boats, and planes
- Other personal property
This list isn’t exclusive. When evaluating your application, the IRS may also consider your financial obligations, such as child support payments.
As the OIC process can take over a year to resolve, your financial situation may change. When the process takes longer than twelve months, IRS staff may verify updated information through IRS databases or by contacting the taxpayer.
Knowing what assets the IRS counts is important for those considering OIC as an option to resolve their debt. The Highland Tax Group can help you answer these questions and find the best resolution for your tax debt problems. Contact us today.