Offer in Compromise – Non-Liable Parties

When filing an offer in compromise, the taxpayer must compute the offer amount. This is the total amount that you expect the IRS to settle for. This calculation is made up of equity in assets, plus a multiple of income less allowable expenses. The allowable expenses include amounts for household costs. When other people live in the household, their income will be considered in determining the offer amount.

Income & Expense of Non-Liable Parties

The household expenses will be prorated based on the percentage of income the taxpayer earns to the total household income. They even have a form to calculate this on. It is necessary to provide the income and expense information of your other household members, whether they are liable or not.
It is critical that the income and expenses are determined and prorated properly, before filing an offer. If done without this “proration”, you may be very disappointed when your offer is rejected, or given back with a suggestion to substantially raise the offer amount. As always, please hire a licensed CPA firm or law firm for any IRS issues, especially one as critical as an offer in compromise.