As a CPA, tax professional, or enrolled agent, guiding your clients through the Offer in Compromise (OIC) process can be a challenging task, especially when it comes to accurately valuing their assets on Form 433. In this comprehensive article and video, we’ll provide you with essential Offer in Compromise tips that will help you skillfully navigate the 433 asset valuation process and increase the likelihood of a successful outcome for your clients. We’ll cover key aspects such as determining fair market value, accounting for depreciation, and understanding allowable living expenses. By delving into real-life examples and offering practical advice, this article and video will empower you with the knowledge and confidence to effectively assist your clients with their OIC submissions, ultimately helping them secure a fresh financial start.
After Checking Out this Video, Click Here to Watch an IRS Solutions Demo on Asset Valuation for an Offer in Compromise
Offer in Compromise Tips for 433 Asset Valuation Case Example
When you say that you have $20,000 in a bank account, the IRS is going to take a look at that. And, there’s a section in the Internal Revenue Manual, that says that I am A) allowed to deduct one month’s living expenses. So, in this case here, we are looking at the client’s monthly income and expenses, and his monthly living expenses total $7,000, his allowable living expenses.
With that $7,000 we are going to go back to his bank and investment, and we are going to take that $7,000 and one month’s living expenses, and subtract it out of his equity in that bank account. On top of that, there’s also a section of the Internal Revenue Manual that says when you are doing an Offer-In Compromise that you will be able to deduct an additional $1,000 from your net equity in that investment.
So, in this case we actually have an account with $20,000 in it, minus one month’s worth of living expenses per the Internal Revenue Manual, that you can see right there.
Also, you get to take an additional $1,000 out of your balance, so that $20,000 in equity, actually becomes $12,000 in equity.
So, whether you are using our software, or you are doing your Offer-In-Compromise on your own, please remember to take into account that these things do exist, and that $20,000 is not always $20,000.
