Should I Make an Offer in Compromise While Unemployed?
Unemployment as a Factor for Offer in Compromise
An Offer in Compromise is one of the many tools in the tax debt resolution toolbox. An Offer in Compromise is is essentially an offer to make a lump sum payment, or 24 monthly payments to the IRS in an amount less than the entire tax debt amount, which the IRS can choose to accept in full satisfaction of the tax debt. One of the main factors for the IRS to accept or deny an Offer in Compromise is the taxpayer’s “reasonable collection potential”. It would make sense that unemployment would lower ones collection potential, and increase the likelihood of the IRS accepting an Offer in Compromise, right? Well, the answer might surprise you.
First, let us take a look from the perspective of an employed person making an Offer in Compromise to the IRS. An employed person makes X dollars. The IRS knows this person made X dollars last month, X dollars this month, and will likely make X dollars next month. The employed persons collection potential is fairly certain. The IRS can look at the level of income and determine if the offer they made is reasonable.
The income of an unemployed person is less certain. If a person made $100,000 a year last year but is currently unemployed, who is to say they won’t go right back to making decent income next month or next year, or some time after the offer in compromise is accepted? Perhaps they will make even more money than before. Perhaps if the IRS holds out, they will be able to get payment in full for your tax liability, maybe even garnish your wages directly. The bottom line is that unemployment adds another factor for the IRS to consider when evaluating an offer in compromise; a factor that can work against the taxpayer!
How Can G&G Law, LLC Help Unemployed Taxpayers with Tax Debt?
Just because you are unemployed does not mean that your offer in compromise will get rejected. As competent and experienced tax resolution attorneys, we can lessen the affect unemployment has on the offer in compromise consideration process by:
- explaining to the IRS that employment in the near future is not likely;
- finding and presenting evidence of a loss in future earning capacity; and/or
- offering the IRS a reason why future employment will not affect collection potential.
Should Unemployed Taxpayers Make an Offer in Compromise?
Nothing prevents an unemployed person from making an offer in compromise. However, while you CAN make an offer while unemployed, the more important question is: SHOULD you?
Every case is different. The reason one owes a tax debt to the IRS, how long they have owed it, the amount of the tax debt, and the financial circumstances of the taxpayer are different in every situation. Without reviewing the totality of the circumstances, it is impossible to make a recommendation. However, there are other options for settling tax debt besides an offer in compromise. You can have your accounts marked “Currently Not Collectible” due to unemployment, which will stop the IRS from taking your savings until your financial situation improves. You can get set up with a Partial Payment installment Agreement that is manageable with your limited financial capacity. If your finances are totally unmanageable, you may even be a candidate for bankruptcy.
Before proceeding with any tax resolution method with the IRS, you should consult a tax resolution professional. Only someone with a full understanding of your situation and a complete knowledge of IRS policy and procedure can properly advise you on how to proceed. If you need to resolve a tax debt with the IRS, we are here to help. We are not simply some tax hotline from an infomercial: Call 203-740-1400 to speak to a tax resolution attorney.