How does Offer in Compromise work for back taxes? Filing status change question

You've got a few separate issues here that need to be addressed one by one. First, regarding filing status - you can file as Head of Household if your college student qualifies as your dependent. For this to work, you must provide more than half their support, they must live with you for more than half the year (college housing counts as temporary absence), and they must not file a joint return. Regarding the Offer in Compromise (OIC), this is completely separate from your filing status. An OIC allows you to settle your tax debt for less than the full amount if you can prove: 1) you cannot afford to pay the full amount, 2) paying would create economic hardship, or 3) there's doubt about the liability. You'll need to complete Form 656 and Form 433-A, providing detailed financial information. For your specific situation with the bankrupt company, you might want to look into filing an amended return (Form 1040X) for the year(s) in question if you can prove the income was reported incorrectly. That could potentially reduce your overall tax debt before even considering an OIC.

After struggling with a similar back taxes situation, I found this AI tool called taxr.ai that was incredibly helpful for my Offer in Compromise application. I had tried filling out the paperwork myself but got overwhelmed by all the financial documentation and requirements. The tool at https://taxr.ai helped me organize all my financial information correctly and explained exactly what the IRS was looking for in terms of proof for my "doubt as to collectibility" claim. It basically analyzed my financial situation and helped me determine a reasonable offer amount that had a good chance of acceptance. It was especially helpful with the Asset/Equity and Income/Expense tables on Form 433-A, which are critical for OIC approval. The documentation guidelines were super specific to my situation.

Just wanted to update everyone - I tried the taxr.ai service that was mentioned earlier and it was actually super helpful for my OIC situation. I was honestly really confused about how to properly document my "doubt as to collectibility" claim, but the system walked me through everything step by step. I had a somewhat similar situation with disputed income from a former employer. The tool helped me organize my documentation and explained exactly what the IRS would be looking for to approve my offer. The analysis of my reasonable collection potential was eye-opening - I was going to offer way too little initially which would have gotten rejected immediately. I'm now waiting for a response from the IRS, but feeling much more confident that my offer has a decent chance of approval!

If you're having trouble reaching the IRS to discuss your OIC options (which is common these days), I highly recommend using Claimyr. I was trying for WEEKS to get through to someone at the IRS about my OIC application, but kept getting disconnected or waiting for hours. I found https://claimyr.com and they got me connected to an actual IRS agent in about 20 minutes when I'd been trying unsuccessfully for days. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c Talking directly with an IRS agent made a huge difference - they walked me through all the OIC documentation requirements specific to my situation and helped me understand why my previous application had been rejected. They even helped me figure out if I qualified for the Fresh Start program which has more flexible OIC terms.

OK I need to eat my words about Claimyr. After posting my skeptical comment I decided to try it because I was desperate to talk to someone about my payment plan options. I've literally been trying to get through to the IRS for THREE MONTHS with no success. I used the service yesterday and got connected to an IRS representative in about 30 minutes. The agent was able to review my account and found that I actually qualified for Currently Not Collectible status due to my financial hardship, which I didn't even know was an option! This puts a temporary hold on all collections while I get back on my feet. They also explained exactly what documentation I would need if I decide to pursue an OIC in the future. Completely worth it just for the peace of mind of finally having real answers instead of guessing what to do next.

Don't forget that if you go the OIC route, they will look at your earning potential, not just current earnings. My brother tried to do an OIC and got rejected because even though he was making little money at the time, he had a degree and work history that suggested he could earn more in the future. They calculated his potential earnings over 4-5 years and determined he could pay the full amount eventually. Also, make sure you've filed ALL required tax returns before applying. They automatically reject OICs if you have any unfiled returns for previous years. And you'll need to be current on estimated tax payments for the current year too.

I successfully completed an OIC last year and paid only about 22% of what I owed. Here's what worked for me: 1) I applied for "doubt as to collectibility" since I couldn't pay the full amount 2) I made sure to calculate a reasonable offer (monthly disposable income × 12 + assets equity) 3) I included a detailed letter explaining exactly why I couldn't pay 4) Most importantly, I CONTINUED making my monthly payments while the OIC was being processed For the Head of Household question - yes, you can claim your college student if they lived with you for more than half the year (dorm time counts as living with you temporarily) AND if you provided more than half their support. But honestly, changing filing status now won't affect your back taxes - it'll only help going forward.