Should I wait until I am back on my feet to file an Offer in Compromise?
Tax problems are sometimes the outward symptom of some other financial issue. Perhaps, the business entered into a bad deal and got cheated out of money they were due by an unscrupulous supplier and you weren’t able to keep your taxes current because you had to pay your employees or other expenses just to keep the business going and the IRS seemed like a creditor that could wait because things weren’t urgent. Or perhaps you lost your job and had to live on your IRA for a year before you were able to find any work. Maybe you changed your W-4 with your employer so you would have a little extra money in your paycheck to buy Christmas presents for your children and forgot to change it back after the holidays and now you haven’t had any money withheld for your income taxes.
Any way you look at it, your initial problem turned into another headache because of the additional taxes that it caused you to owe.
So where do you turn from here? Should you wait until you get back on your feet? If there is one thing I know of entrepreneurs is that they believe they can fix any situation. No matter where the business is now, a little more time, a little more money, just one more deal and the business will be turned around. Or maybe you are looking for a new job, but the recruiter suggests that it won’t be available for another 9 months or so.
If you find yourself in this situation, now is the time to handle your IRS problem. This blog outlines several of the means available to resolve your tax issues (offers in compromise, installment agreements, currently non-collectible, etc.). All of the methods for dealing with your tax debt are functions of your current income, allowable living expenses, and the net realizable equity in your assets. That means, while things are bleak for you financially, you are in a better position to negotiate a reasonable settlement of your tax problem with the IRS. If you wait until you are back on your feet and financially stable to negotiate with the IRS, you will face much stiffer resistance and much higher settlement offers. You may even earn yourself out of several of the more reasonable resolution possibilities.