Tax Q&A;: Try, Try Again

This daily tax season column publishes tax questions from readers answered by local members of the California Society of Certified Public Accountants. Questions and answers will be posted on The Times’ Web site, https://www.latimes.com/taxes, as they appear.

Q: I owe the IRS about $9,000. The most I can pay is about $5,000. I filled out the offer-in-compromise paperwork because I heard the IRS is more willing to accept a lower payment than it has been in the past. But the IRS rejected my application. What do I do now?

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A: The IRS looks at several factors, including net worth and income, when evaluating taxpayer offers to pay less than the amount owed in order to settle the taxpayer’s debt to the government. After talking with you further, it turned out that you had overstated your resources--in other words, your application made you look richer than you are. The biggest culprit was your retirement account. You included the full amount even though you would not be able to withdraw your employers’ contributions and what you did withdraw would be reduced even further by taxes.

Your offer was more than 50 cents on the dollar. The average offer-in-compromise accepted by the IRS is closer to 12 cents to 15 cents on the dollar. Submit your corrected application; it’s likely the IRS will accept it gladly.

Eric Smith

Offer-in-compromise specialist, IRS

Los Angeles

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To submit a tax question, send it by e-mail to taxes@latimes.com; by fax to Tax Q&A; at (213) 237-7837; or by mail to Tax Q&A;, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Your name will not be published, but you must tell us how to reach you in case we need to clarify your question.