Last night Barack Obama and John McCain seemed to relish telling us that things are almost as bad as they were during the great depression.
Setting aside whether it’s wise for a Presidential hopeful to tell the already frightened citizenry how horrible things are and how much worse they are likely to get, the inescapable truth is we can’t pay our mortgages, we can’t keep our jobs and we can’t afford gas.
It’s not surprising then that some of us can’t pay our taxes.
I have written extensively about how IRS settlements (i.e. Offers in Compromise) are hard to get. And there are many unscrupulous psuedo-professionals out there who are willing to lie to you and make you think you qualify for an IRS settlement when you clearly don’t. They clutter the landscape and make it difficult for taxpayers to know what to do. See Pennies on the Dollar . . . Buyer Beware .
It is still difficult to get an OIC accepted, but because of the bad economy IRS collection agents are now encouraging delinquent taxpayers to file them.
This is important. It means government officials higher in the chain of command want the public to know that the IRS is willing to accept OIC’s that they it would not have been willing to accept were the economy thriving.
OICs are supposed to be a win-win for the Government and the taxpayer. The taxpayer gets relief from a liability he will never be able to satisfy and the IRS saves the time and expense of futilely pursuing enforced collection. So the trick in filing them is to convince the government that it is in its best interest to accept the offer you are making.
My guess is that the recent passage of the $700 billion economic bailout bill together with the growing costs of the wars in Afghanistan and Iraq has resulted in White House pressure on the IRS to collect as much as possible in back taxes as quickly as it can. The best way for the IRS to do this is to encourage taxpayers who owe back taxes to offer lump-sum settlements (or short-term payoffs) of their liabilities.
You should speak to a tax lawyer or tax CPA if you are indebted to the IRS and don’t believe you will ever be able to repay that debt. Before you call someone, though, you should be able to answer “yes” to the following questions:
- Do you have little or no equity (the fair market value of the asset less encumbrances) in your assets? Assets includes IRAs, 401k plans and other retirement accounts.
- Do you have little or no income left over at the end of the month after you pay your current taxes and your necessary living expenses?
Also, I suggest you read my article, Offers in Compromise: Calculating Reasonable Collection Potential. It shows how the IRS determines whether or not to accept an OIC and shows you how to calculate the amount you will probably have to pay to settle your debt.