When Do Your Back Taxes Expire?  A Quick and Easy Test to See if you Qualify for an Offer

Watch the video for Three Offer in Compromise Case Examples or Read below.

The starting point for all Offer investigations is WHEN YOUR TAXES ARE GOING TO EXPIRE or the Collection Statute Expiration Date. In fact, by finding out when your taxes expire - you can do a quick and easy test to see if you qualify for an Offer!

You'll just need to:

  1. Know the tax years that are owed and estimate when they are going to expire:
    Assuming that you filed your taxes reasonably on time:  here's some rough expiration dates:Tax year 2002 should expire in 2003
    Tax year 2003 should expire in 2014 or tax years after the IRS assessed the tax...
    Tax year 2004 should expire in 2015 or " " .
    Tax year 2012 should expire in 2023 or " ",  for example.
  2. You'll need to know the amount $ you owe the IRS.
  3. You'll need to have a rough idea of what your monthly "disposable" income IS. 

Case example 1:  Tax year 2012, $22,000 owed, taxes expire in May 2023.  

CLOCK LEFT:  120 Months  DIVISION ($22,000/120):  $183 Month

if you just filed your 2012 tax return and you owe $22,000 in taxes that you can't pay, the IRS is going to log in your taxes in say - May 2013 and that will officially start the CLOCK on your taxes.  They will expire 10 years or 120 months from then as long as you don't file bankruptcy - which extends that time period (or file an Offer in Compromise and don't succeed which also extends the time clock.)

So what does this mean to doing an Offer in Compromise?

Well -- the math is pretty straightforward.  If you are going to get an Offer on a debt that has 120 months left of life on the CLOCK: divide the amount of taxes - $22,000 by 120 months = $183 month.   So to get an Offer on that amount you will need to show a DISPOSABLE INCOME of less THAN $183 month.

Case example Two: Tax year 2004, $1 Million owed, Tax expires 2015.

CLOCK LEFT:  33 Months  DIVISION ($1 million/60):  $30,303 Month

To get an Offer - you'll have to have less than $30,303 of disposable  income to get an Offer.  And YES - most people meet this criteria. smile

Case example Three: Tax year 2005,  $100,000 owed, Tax expires in 2016

CLOCK LEFT: 45 Months  DIVISION ($100,000/45):  $2222 Month

To get an Offer - you'll have to have less than $2222 of disposable income to get an Offer.  Maybe?

To determine your disposable income, you'll need to go thru the IRS worksheets....and the Income/Expenses/Assets Model which is the other fundamental key to the Offer.

This is just an easy way to check.  Want more clarity about you qualifying for an Offer or solve another tax issue? Call us at 1 888 282 4697 and talk to a tax expert at Washington Tax Services.

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