Will the IRS Accept My Offer in Compromise?
The gig economy has grown significantly since 2018. Today, over seventy-three million Americans freelance full or part time. Freelance income is feast or famine. Two or three months of lucrative earnings might be followed by two or three months of basically zero income. These fluctuations often make consistent estimated tax payments impossible. Furthermore, during the lean months, many freelancers cancel these payments altogether. As a result, they often have very high tax bills in the spring.
Initially, the scaled-down IRS might not pursue past-due taxes very aggressively. But rest assured that such enforcement is coming. When that day arrives, an offer of compromise could be a good way out. As outlined below, the OIC qualifications are rather subjective. A Chicago debt reduction lawyer helps delinquent taxpayers present strong cases that often reduce or eliminate the debtor’s unpaid tax obligation. Briefly, if the IRS accepts an OIC proposal, it erases the remainder of the tax debt.
Before addressing the merits of the offer, the IRS examines the taxpayer’s assets and determines which one can be liquidated to pay the debt.
There’s a significant difference between an asset’s fair market value and its salability value, which is the only value that matters in this context.
A home is a good example. The traditional process usually takes weeks or months, at a minimum. If the IRS wants money now, which it usually does, the homeowner must usually work with a home investor. A “we buy ugly houses” home investor usually offers pennies on the dollar for an as-is, no-inspection cash sale.
Frequently, a Chicago debt reduction lawyer obtains a written home investor offer and attaches it to the OIC request.
Other long-term assets, such as stocks and bonds, are often tied up in legal trusts, and the taxpayer cannot immediately access the funds therein.
Current Monthly Cash Flow
The IRS will calculate the taxpayer’s monthly cash flow and determine how much the taxpayer can afford to pay in case, similar to an installment agreement.
Significantly, credit card payments don’t count in this calculation. The IRS doesn’t consider this money to be a necessary living expense. As a result, an initial determination is often very unfavorable to the taxpayer.
Lawyers usually submit credit card statements which show that the taxpayer has used the card for living expenses as opposed to exotic vacations.
Future Income Potential
Future income potential within the context of tax law and the IRS income and expense table is defined as the ability of the taxpayer to generate earnings through physical exertion. In addition, future income potential also refers to the ability of the taxpayer’s assets to generate a return on investment.
Within the context of investing, future income potential refers to “earning potential,” the upside of a particular product generating earnings. The earning potential of an investment represents the largest possible profit made by a corporation and is usually passed on as dividends to the investors.
Work With a Detail-Oriented Cook County Lawyer
No matter what kind of financial problem you are having, there’s a way out. For a free consultation with an experienced debt reduction attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. We routinely handle matters throughout Chicagoland.