Is My Offer in Compromise Based on How Much I Owe?
The most common form of offer in compromise submitted to the IRS is an offer in compromise based on doubt as to collectability. This is the basis for the book (Offer in Compromise Manual). Basically, what this type of offer in compromise means is that you are offering the IRS to take less than what you owe because you simply do not have the income or assets (including equity in your property) to pay off your tax debt in a reasonable time.
The big question everyone wants to know is what is the least amount I can offer the IRS to get them to accept my offer and settle my tax debt. Most people believe it is some sort of percentage of the amount you owe like 5%, 10%, or 15%. The truth is, it does not really matter how much you owe. What the IRS considers when determining whether to accept an offer in compromise based on doubt as to collectability is your current financial situation. They look at your monthly income, your monthly expenses, they compare your expenses to their national standard expenses for certain categories, and they also want to consider the available equity you may have in your assets.
So, for example, if you have a paid for home worth $100,000 and you only owe the IRS $10,000 it is going to be nearly impossible to get them to accept less than what you owe. However, if you are in a rough financial position and own very few assets then you will be in a better position for an offer in compromise. Many people think that when they are going through a job lay-off or they are out of work for some other reason that they should wait to work with the IRS. However, this tends to be an ideal time to get the IRS to work with you on your liability.