Offer in Compromise
The IRS is required to collect tax debts in full. However, the tax code provides the IRS with discretion to compromise an unpaid liability consistent with grounds established in Treasury Regulations. One such ground is doubt as to collectability. In situations where a taxpayer lacks the income and resources to pay the tax debt in full or where there is a genuine doubt that the amount of the tax debt is correct, an offer in compromise is a potential solution. The IRS is authorized to settle a tax debt for less than the full amount owed in either a lump sum or installment payments provided the offer meets or exceeds what the IRS determines to be the reasonable collection potential (“RCP”). RCP generally equals the net equity of all of a taxpayer’s assets (including exempt assets) plus the net discretionary monthly income available to a taxpayer based on the taxpayer’s income less a standardized allowance of expenses published by the IRS and multiplied by 12 to 24 months depending upon the duration of the settlement payment term. The lawyers at Woner, Reeder & Girard, P.A. can help you to determine if you qualify for an offer in compromise.