Monday, June 30, 2008

Caution: Pennies on the Dollar Part II

In part one of this series on an Offer In Compromise we discussed how this has become one of the most misunderstood (and incorrectly promoted) tax solutions in recent times. There are a lot of companies who advertise this "Pennies on the Dollar" solution as the one and only way to resolve your tax debt with the IRS. They also willingly charge you money to submit an Offer In Compromise on your behalf with total disregard to your financial situation and the requirements the IRS has set forth in order to qualify for this resolution. While this is a viable option within the IRS tax code I must caution you to make sure you are aware of the qualifications of any company who is working on your tax resolution.

So let's look at one of the qualifications inside this program so you are aware if this is an option that you can qualify for. This could save you time and money. One reason for submitting an Offer In Compromise is called "Doubt as to Collectibility." That is when doubt exists (under your current financial conditions) that a taxpayer could fully pay off the tax liability in question before the expiration date the IRS has set. The IRS typically has ten years from the assessment date for each tax year to collect the unpaid date for that year. There are several things that can cause this expiration date to be extended but we will discuss that at another time. In order to confirm "Doubt as to Collectibility" there must be a financial analysis performed in order to discover if you can qualify under this rule. Current equity in the assets you own, current disposable income, terms on current loan payments, and future potential income are some of the things a financial analysis will uncover. If this is not properly done prior to submitting an Offer In Compromise you may be doing so without knowing whether or not you can even qualify for this program. This will waste time and money and extend the amount of time the IRS can collect the tax liability in question. Make sure you analyze your current financial situation to discover if you qualify before you follow this path to resolution.

In the next part of this series we will look into additional guidelines from the IRS on qualification for submitting an Offer In Compromise. Be sure to check back next week.

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