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DebtHelp.com Tip: In order to request an Offer in Compromise agreement, you need to have a realistic figure in mind that fits in with your budget. Look at your total unpaid tax bill and figure out what is a reasonable and affordable amount you can pay to clear it? How do you calculate this figure?
Here are some helpful steps you can follow to arrive at your Offer in Compromise figure:
Organize documents. Gather together all your financial information that applies to your situation. For instance, you will need your titles, bank statements, mortgage notes, insurance policies, cancelled checks, and other financial-related information. You also will need any financial statements including income information (your W-2 for wages).
Disposable income. Your disposable income is defined as the amount of money you have left after paying all of your expenses. Technically, it is your gross income less any monthly living expenses. Examples of monthly living expenses include utilities, taxes, groceries, health care, mortgage payments, and secured debts. Worksheets are helpful to calculate this figure.
Net worth. This step involves knowing (and calculating) how much your net worth is. Net worth is defined as your assets valued at current fair market value less any applicable expenses. Applicable expenses would include those you incur when attempting to sell your assets (otherwise known as liquidation expenses). The use of a worksheet helps with this.
Total. The final step will be to add together the above two figures, disposable income and net worth. Project this figure out over 60 months and you will have the figure needed for a reasonable offer.
Method of payment. Finally, figure out how you will pay the amount. Will it be check, credit card, money order? Let the IRS know.