How do I know if I qualify for an offer in compromise?

The IRS is interested in two numbers, and it is these two numbers added together that determine whether or not the IRS will accept your offer. The IRS wants to know: [1] The amount it could collect from your future disposable income; and [2] The amount the IRS could collect from the sale of your assets. The sum of these two numbers is calledReasonable Collection Potential” or “RCP.”

Now, where does the information used to arrive at these two numbers come from? It comes from you, the taxpayer. You or your tax professional will first collect and calculate the information. Before submitting this information to the IRS, your attorney will deduct all possible, allowable expenses and take all necessary and legal steps to minimize the value of assets. An experienced tax lawyer will then forward the necessary financial information to the IRS, and negotiate with the IRS in an effort to prove that the financial information constitutes the true RCP.

The goal is to make RCP as low as possible and pay as little as possible. You’re attempting to create doubt as to collectability. This can be accomplished legally and above board by calling upon what is allowed within the Internal Revenue Manual and by deploying clever financial calculations. It’s vital to seek the help of a tax professional with a proven track record of success.

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