IRS Offer-In-Compromise -The Number 1 Mistake Homeowners Make
You have heard the saying, “there’s no place like home.” But what if you are trying to do an Offer-In-Compromise with the IRS and you have a lot of equity in your home? You want to protect that equity, right?
In these situations, you may be advised to transfer the home out of your name. Someone may tell you to do a quick transfer of the title to your wife or children. That way, when you file for your Offer-in-Compromise, it will look like you don’t own the home.
Doing this comes with problems and isn’t in your best interest. Here is what you need to know.
When you fill out the Offer-In-Compromise application Form 433-A, there is a question that asks if you transferred any property to someone else in the last ten years for less than its total value.
Problem #1
If you answer yes to the question, your offer-in-compromise will be adjusted to reflect the value of that real estate. Why? Because there is a ten-year look-back period.
That means that the equity you thought you gave away for the purpose of the Offer-In-Compromise still belongs to you.
Problem #2
Sometimes, a person will answer no (even if they know they did it). In that case, the application will be reviewed by an IRS Offer Specialist. The Offer Specialists are trained to examine an applicant’s full real estate history.
They will research an applicant’s name, focusing on any property within their county and any property owned within the last ten years.
If the Offer Specialists find that you lied, that can be a huge legal issue. You lied on a document you filed with the federal government, which is a crime.
How do you avoid this?
Don’t listen to advice from anyone other than a legal professional. The advice that you get from friends or peers is not going to be the best legal advice.
Find an experienced tax attorney to help you get the best offer-in-compromise result.