Is There Any Truth In Tax Settlement Commercials?
As a tax controversy attorney one of the most common questions I am asked is whether there is any truth in the tax settlement advertisements that are frequently on tv and radio. The short answer: the advertisements are based on a real program the IRS and State tax agencies have called an Offer In Compromise, but the commercials are misleading in how they present "pennies on the dollar" settlements as being available for everyone.
When Will An Offer to Settle Be Accepted?
The general standard is that you can settle your tax debt when the amount you offer is more than the IRS or State can expect to collect within a reasonable period of time.
I like to explain it to my clients this way: If I owe you $100, but I only have $10 in my pocket then you might be willing to settle with me for that $10. However, if I owe you $100 and you know I have $200 in my pocket, then you probably aren't willing to settle for $10. The IRS and State tax agencies take a similar approach.
My Co-worker, My Cousin, and My Brother's Friend's Catsitter...
It's human nature to compare ourselves to others, but for these purposes you shouldn't do it. You can owe the exact same amount to the IRS as your next door neighbor, but end up paying completely different amounts. This is the frustrating reality of tax debt settlements.
If your neighbor has three kids, two leased cars in driveway, one alimony payment, and no job, then he might qualify for an offer in compromise while you are required to pay the IRS in full. This is because his income and expenses are different from your income and expenses. Therefore his settlement amount is different from your settlement amount.
What Factors are Considered
The five primary factors looked at by the IRS and State are:
- How much you owe in back taxes,
- Your current income,
- Your current necessary expenses,
- The value of your assets (cars, homes, retirement accounts, etc...), and
- The amount of your liabilities (car notes, mortgage, 401K loan, etc...).
Other factors may be considered such as any health issues you are facing, your future income potential, anticipated changes in your life, and the amount of time the tax agency has left to collect your tax debt.
Conclusion
If you have an IRS or State tax debt, then you should consider an Offer In Compromise. However, before hiring a tax professional or submitting an offer in compromise speak with an experienced tax attorney about whether your offer is likely to be accepted.
For a free evaluation of your tax case feel free to contact me using the Triumph Over Tax Facebook page, the contact form on our website, or by calling 888-351-3707 and asking for Adam.