You may have heard the term “Pennies on the Dollar” in reference to settling a tax debt. However, 99 cents is “pennies on the dollar,” and filing an Offer in Compromise is complicated and time-consuming. An OIC could cost your more than it’s worth.
Fact: An Offer in Compromise May be Your Least Desirable Option
Phil came to Tax Matters Solutions with an IRS wage garnishment of over $25,000. Phil also owed half a dozen other creditors who had sued him and won so they have a judgment against him. If Phil settled his debt with the IRS, all his other creditors would come clamoring at his door. Settling his debt with the IRS is not Phil’s best option.
Myth Number Two: If You Owe Back Taxes, the IRS Will Accept an OIC
The IRS will not always accept an Offer in Compromise. If you have nothing, then the IRS will settle for less than what you owe. But, if you own property with enough equity to cover this debt, the IRS will come looking for its money.
Fact: The Best Time to Make an OIC is When You Have No Money
The time to settle your debt with the IRS is when you have nothing, when you “need to borrow from your grandmother to pay my fee,” says Marc Jernigan of Tax Matters Solutions. Don’t wait until your situation gets better before you start working on resolving it.
Myth Number Three: I don’t Think I Can Pay the $17,000 I Owe, therefore I Should Make an Offer in Compromise
Rick owes the IRS $17,000. He nets $310 a week. Rick currently lives with a friend because he has health problems and can’t afford rent. The IRS has hounded him. Tax Matters Solutions helped Rick establish a “Hardship, currently not collectible status” with the IRS. If Rick maintains that status for ten years, he’ll never have to pay his back taxes. If he files an OIC, he’ll face a lot of paperwork and many fees, for no benefit.
The Fact: An Offer in Compromise May not be Your Best Line of Defense
As in Rick’s case, there may be many other factors to consider first. For example, many states don’t have a statute of limitation on collections. Therefore, they can collect against your estate. Your best course of action may be to settle with state first.
The Fact: If Your Accountant does not Look at Your Entire Financial Picture, You’re not Receiving Adequate Representation.
Tax Matters Solutions CPA’s will examine your case thoroughly before determining your best course of action. They will file an OIC on your behalf only when you qualify. They will not file frivolous offers, therefore saving their clients from unnecessary fees and paperwork. They offer you the best strategy for your specific situation, be it an OIC, up-front reduction of tax liability or a penalty abatement.