Did you know that the IRS uses a formula to determine whether to wipe out your IRS debt or not?
The formula is called "Reasonable Collection Potential." It is essentially a cash flow analysis calculated by the following: your income minus essential expenses allowed by the IRS. And then, your assets are added to the formula. So if you can show the IRS that you have little to no cash flow and have a minimum amount of assets, you could be a candidate for an Offer-In-Compromise. The Offer-In-Compromise is a way to potentially settle your debt for less than you owe.
Sometimes, you do not need to file an Offer-In-Compromise.
Example: Your tax debt is about to expire. Your IRS debt has an "expiration date." After your debt is not collected for ten years, your debt could just go away. Your tax professional could find out when your "expiration date" is.
Sometimes, you would want to postpone filing an Offer-in-Compromise.
Example: You spent money or gave away your assets in the last three years while owing money to the IRS instead of paying your debt. The IRS will count this against you.
If you have any questions about Offers-in-Compromise or other IRS tax issues, please feel free to contact us at (341) 766-1247 (Kenny), (510) 828-6215 (Ralph), or by checking out our website, www.financial-harmony.com.