Though I sit in New Haven, Connecticut most days we assist taxpayers all over the country to resolve their tax debts with the IRS. There is a lot of confusion surrounding the IRS Offer-in-Compromise program, so I wanted to clear up some misconceptions.
- There is no magic to an Offer-in-Compromise. At its core, the IRS Offer program is based upon a formula called “Reasonable Collection Potential“, or RCP.
- Many taxpayers believe that if they cannot tap equity in assets than that equity is not included. That is wrong. What the Offer-in-Compromise program is effectively is calculating the amount of money the IRS is willing to accept to settle the tax debt. It is not a measurement of what the taxpayer can easily access. If the taxpayer has equity they cannot tap and cannot get from some other sourfce than they may not be able to do an Offer-in-Compromise and may need to find another solution.
- Even once the RCP is calculated there are options for taxpayers to reconsider lifestyle to make themselves a better Offer-in-Compromise candidate. It is critical we review and strategize about a case to give it the best chance of success when filed.
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