Dissipated Assets can maim your OIC application.
Let’s say you spent many hours producing an Offer-in-Compromise Application that shows it’s in the Government’s interest to accept your payment offer of 50 percent on each dollar owed. Your tax debt, cut in half. With a smile, you submit it to the IRS. Many months later, the IRS responds with a counteroffer that is $20,000 higher. Why?
IRS Eyes Form 4797 for Dissipated Assets
It turns out that part of the IRS process when evaluating an OIC Application is to look back at your last three years of tax returns, specifically at Schedule D and Form 4797 where you report sales of assets.
There, they found a big sale of stock that netted you $20,000. Now they want that money plus your offer amount.
The moral of the story? Always look back in time — three years of returns worth — before finalizing an Offer-in-Compromise Application. Maybe that stock sale was on the earliest return and waiting a year before you make your offer is possible.
Another strategy is that if you owe the IRS and have a big sale that nets cash, make sure you spend it on “allowable expenses.”. Allowable expenses are housing, food, medical expenses, not vacations and personal loans. Paying down a credit card debt is not an allowable expense unless the underlying charge can be categorized as such.
If you or someone you know has received a Notice of Intent to Levy or some other federal or state tax issue, please feel free to contact me at either (352) 317-5692 or email firstname.lastname@example.org.