Offer In Compromise - Services
DISCLAIMER: THE FOLLOWING INFORMATION IS NOT LEGAL ADVICE. THIS IS GENERAL INFORMATION AND DEFINITIONS VARY FROM STATE TO STATE. PLEASE CHECK WITH A LOCAL ATTORNEY OR CONTACT THE IRS WITH ANY QUESTIONS.
Tax resolution companies offer many different services and promise many results, but they don’t tell you exactly what they do. Below, Bismark Tax, Inc. will show you our services “in action” and let you know how we get things done here in our office with our tax attorneys.
Offer in Compromise:
The IRS website states that an offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability, or doing so creates a financial hardship. We consider your unique set of facts and circumstances:
Ability to pay
So what does that mean exactly? The Offer in Compromise is a formula based on IRS standards or if its a state tax debt it is based on the respective state’s formula (please keep in mind that not all states offer these types of tax reduction programs). I will use the IRS’s formula for purposes of showing examples. The IRS uses a formula to determine what your offer amount is. That is, the IRS uses the formula to determine the “Offer Amount.” The “Offer Amount” is what the IRS is most likely to accept, so the objective is to get to the lowest “Offer Amount.” Remember, this isn’t like the show Pawn Stars where you are haggling over a total amount, its a precise formula created by the IRS and that is the NUMBER 1 reason you need to hire Bismark Tax, Inc.
So what is the formula that the IRS uses? In its simplest form its A+B+C=D. The IRS uses your total income and your allowable expenses and determines your “disposable income.” The IRS will then determine how much your assets are worth. Finally, the IRS will want to know if you have any dissipated assets (usually people don’t have these, but in short it means you sold some assets for less than their value to help you in the Offer in Compromise). Then you add everything together and that is your “Offer Amount.” For example, below you can see that this person owed over $25,000 to the IRS and based on the formula above Bismark Tax, Inc. was able to help him reduce his debt to $50, yes that is correct from over $25,000 to $50. Just remember not everyone will qualify and his “Offer Amount” was based on his income, expenses and assets.
Here you can see how using California’s Offer in Compromise formula the tax attorney was able to lower a liability of $88,115.01 to $1,500.