Pros & Cons of an Offer in Compromise
There are more than enough reasons someone might not be able to pay the Internal Revenue Service during tax season. The problem is, most people don’t know what to do when a tax problem arises. The IRS may suggest that you make an offer in compromise, but should you follow that advice it or seek out another way out of the problem? Here are the pros and cons you should know about when considering an offer in compromise.
Pros of an Offer in Compromise
If you agree to make an offer, you might reduce the total amount you owe the IRS to a sum payable all at once. Luckily for you, a few years back, the IRS lowered the bar on what constitutes a successful offer in compromise. Even if the amount’s not that small, you’ll likely be able to pay the balance off by making payments each month over a one or two year period, depending on which time frame you elect. This may also give you the chance to hold onto your assets and your bank account.
Making an offer that gets accepted may also provide other relief like stopping IRS collection activities and unfreezing your bank account if it has been seized. Once the offer is accepted and payment is made, any garnishment of your wages and liens on your account will be dropped. If you live paycheck to paycheck like many people, this could be the breath of relief that is seriously needed.
Cons of an Offer in Compromise
While there are many pros to an offer in compromise, there are most definitely cons that come along with it that may outweigh the benefits. The guidelines for offers in compromise are very strict, and, as a result, not everyone qualifies. Taxpayers with low income and with very few assets are best suited for an offer in compromise. If you rely on tax credits to get a higher refund, you may be required to give them up for the year following acceptance of an offer in compromise. This can significantly decrease your refund for the following tax year. Another factor which might deter you from making an offer is the fact that accepted offers in compromise are a matter of public record. If you prefer to keep your tax information secret, you need to know that you give up that level of privacy once your offer in compromise is accepted.
An offer in compromise can provide you with some financial breathing room when you really need it. Although the option comes with many advantages, you should do your research and consult an experienced tax attorney before deciding if it is in your best interest. Always have a backup plan, just in case you don’t qualify, and always make sure to thoroughly assess your options.
Contact An Experienced NYC Tax Attorney
Determining the best way to deal with tax issues can be overwhelming. If you have questions regarding an offer in compromise or you need help understanding other tax laws, a NYC tax attorney at Mackay, Caswell & Callahan, P.C. have the experience you need on your side.
For a consultation, complete our online contact form or call us toll-free at 844-MCC-4TAX (622-4829). We will aggressively defend your rights against the IRS and help you with your tax issues. You don’t have to attempt to navigate the complex world of tax law alone. We have offices in Albany, New York City, Rochester, Syracuse, Utica and Watertown, so whether it’s a New York tax attorney or a Syracuse tax attorney you need, we stand ready to help.