Choosing the right IRS debt resolution depends on client’s financial details

Cpapracticeadvisor.com reported that an offer in compromise (OIC) is suitable for fewer clients than commonly assumed when dealing with IRS debt. The decision to pursue an OIC versus other options depends on a client’s realistic ability to pay, including equity in assets and disposable income.

The article explained that the financial statement is key to determining eligibility for an OIC, as offers below the IRS’s calculated collection potential are typically rejected. This potential includes equity in assets like home and vehicles plus future income.

Practitioners are advised to gather a comprehensive financial picture, including income, allowable expenses, retirement accounts, and business assets, before recommending a resolution path. Clients often underestimate asset equity and overestimate hardship considerations.

For many clients able to pay over time, an installment agreement is a simpler and faster option than an OIC. These agreements can often be set up online without full financial disclosure if balances are under IRS thresholds, and they halt enforced collection while payments are current.

However, installment agreements result in ongoing penalties and interest, increasing the total amount paid. Practitioners should inform clients about these costs upfront to help them make informed decisions about their IRS debt resolution options.