I own my house as well as some Investment Properties - Do I qualify for an Offer in Compromise?
The question this week is from a person who owns a house as well as some other investment properties and they would like to know whether they will qualify for an offer in compromise. The answer is: it depends.
What does it depend on, you ask? Well, your financial situation as a whole, but most specifically, how much equity do you have in your residence as well as the investment properties. In this particular case, the taxpayer/potential client has over $60,000 in equity in his personal residence and owns an investment property with a closing that is pending where he will net over $100,000. In this case, it is simply impossible for an offer in compromise to be accepted. That is not to say that all people who have substantial equity in their homes will not be able to have an offer in compromise accepted. There are some ways around that equity depending on your credit and ability to borrow.
What do we do in this type of situation? Well, the taxpayer’s immediate need is to prevent any levy of his wages, bank accounts, or seizure of any property. Next, we must negotiate with the IRS to work out a payment plan. I would advise this taxpayer to make as large a lump sum payment to the IRS as he can and set up a payment plan for the balance. The quicker you are able to pay off the balance due, the less interest will add up on your account. We can also analyze what caused the taxpayer to owe the taxes in the first place and see if there is any way to get the IRS to abate any of the penalties. As always, the IRS will not knock off any of the interest unless the IRS has made a mistake - and it is generally very difficult to prove.
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