The IRS seeks to collect 80% of all of the equity value in all assets
owned by you that you can liquidate to raise cash (including your home, retirement
accounts, motor vehicles, stocks, bonds, collectibles, jewelry, precious metals, etc.), plus either: 12 months of your net disposable income
, if you plan to pay the offer in compromise within 5 months; or 24 months of your net disposable income, if you plan to pay the offer in compromise in more than 5 months.
Net disposable income equals gross income
from all sources, minus reasonable expenses. However, the IRS has a schedule of the cost of various expenses
, and if you exceed those amounts in calculating your net disposable income, your offer will be rejected, unless you can justify the additional expenses as necessary/unavoidable.
The best way to determine what the IRS will accept is to actually fill out the Offer in Compromise form.
Then, you will know exactly what you can offer.
Once you fill out the form
with what you believe are the true numbers, compile the IRS schedule numbers and see how they differ from what you believe are your unavoidable expenses. That's the zone in which the negotiations will occur. If you want to avoid some tax
, and thereby increase your standard of living while making the offer payments, you must be able to justify the additional expenses.
That's pretty much the entire process in a nutshell.
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