These are two factors that the IRS will look at when reviewing your offer in compromise.

1. Net Equity in Assets

The starting point is the current or fair market value of an asset. You then are able to reduce that value down to a quick sale or liquidation value. The amount of the reduction in value is dependent on the type of asset. These reductions are built into the MyTaxBreak program and are applied automatically. From this reduced value you are then able to deduct any loan against the asset. This is how your net equity in assets is determined. If you’re able to liquidate an asset, pay the income tax due on the liquidation and still have enough left over to pay the IRS in full you do not qualify for an offer in compromise.


2. Net Disposable Income

The starting point for this second factor is your gross monthly household income. From this you subtract all of your necessary living expenses. The catch being that the IRS and you may not agree on what is a necessary living expense. The IRS has created maximums allowed for most common expenses. For instance, the IRS allows a maximum car payment of $517. If your car payment is more than that, then any amount over the $517 will not be allowed as a deduction against income. In that case based on your actual expenses you could have no disposable income, but under IRS collection standards you do. The MyTaxBreak program has these expense standards built into it and will automatically apply them. In addition there are some expenses that you may not have but the IRS is required to give you regardless. For instance, you get an allowance for your family's out of pocket medical expenses whether you have them or not. The MyTaxBreak program will include these for you so that nothing that is allowed is missed. If you have sufficient disposable income to pay the IRS in full over 6 years you would not qualify for an Offer in Compromise settlement.


If your lifestyle is not extravagant and despite this you’re still just barely making it each month and you’re not sitting on a pile of money (equity) large enough to pay the IRS in full then you are a good candidate for the MyTaxBreak program. Unfortunately, it’s very difficult to know until the financial review is complete. There are a lot of factors that have to be taken into account. For instance, you may feel or even been told by the IRS that you do not qualify for the program because your income is too high. That’s not the end of the story by any means. You may have a high income, but also be swamped in payments that take priority over the IRS, thus effectively leaving you with no disposable income to pay the IRS, even under its own standards.



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