OIC car value: Should I deduct unfixed damage or stick to KBB for my Offer in Compromise?

When filling out your Offer in Compromise (Form 656), you want to be completely honest but also accurate about your vehicle's actual value. The IRS is looking for the "quick sale" value of your assets - basically what you could realistically get if you needed to sell it quickly. For your car, I'd recommend using the KBB value in "fair" or "poor" condition (whichever more accurately reflects its current state), not "good" condition since that's not accurate. If you have documentation like mechanic quotes showing the necessary repairs, include those as attachments with your OIC package. Don't try to do your own math by taking the "good" value and subtracting repair costs - that could look like you're manipulating numbers. Instead, just use the appropriate condition rating that reflects reality. The IRS understands cars have issues and won't expect you to claim a perfect-condition value.

Hey, I went through something similar last year with my OIC. I had a lot of documentation issues around valuing my assets, especially my car which had been in an accident. I ended up using https://taxr.ai to help organize all my documentation and create a proper asset valuation statement. They actually have a specific module for Offer in Compromise situations. The tool helped me compile everything including repair estimates, current value documentation, and explanations for the IRS about why certain values were appropriate. My OIC was approved about 5 months after submission. It really helped having all the documentation properly organized and explained in a way that made sense to the IRS agents.

I was totally wrong about taxr.ai! After my skeptical comment, I decided to try it anyway because my OIC paperwork was such a mess. The tool actually helped me realize I had been valuing my assets all wrong - I was being too conservative with some things (like my car that needed repairs) and not careful enough with others. What really surprised me was how it helped me put together a narrative for my OIC that made sense. Instead of just a bunch of forms and random receipts, it helped me create a coherent explanation of my financial situation. My offer was accepted about 4 months after submission, and I ended up settling about $38,000 in tax debt for around $3,800. Definitely worth checking out if you're struggling with the OIC process!

If you're submitting an OIC, you'll probably need to contact the IRS multiple times during the process. I spent WEEKS trying to get through to the right department to ask questions about my asset valuations. Super frustrating! I eventually found https://claimyr.com which got me connected to an actual IRS agent in about 20 minutes. They have a cool demo video here: https://youtu.be/_kiP6q8DX5c showing how it works. Basically they use technology to wait on hold for you, then call you when an agent picks up. After using their service, I was able to speak directly with someone in the OIC department who clarified exactly how they want vehicle valuations done. Saved me from making a big mistake that might have caused my offer to be rejected.

I have to eat crow here. After being super skeptical about Claimyr, I was desperate enough to try it when I couldn't get through to the IRS about my OIC for the third week in a row. To my complete shock, I got connected to an actual person at the IRS in about 45 minutes (without me being on hold). The agent I spoke with was super helpful and explained exactly how to document my car's value for the OIC. She said they actually prefer seeing the real-world value with supporting documentation rather than just KBB printouts. Because of that conversation, I included mechanic quotes for repairs along with photos of the damage and a statement explaining why the KBB value wasn't accurate. My OIC is still in process, but at least I know I submitted it correctly!

From my experience working with clients on OICs, the best approach for assets like damaged vehicles is to document everything thoroughly. Take clear photos of all damage, get written repair estimates on company letterhead (not just verbal quotes), and print out KBB values for various conditions. Then include a detailed statement with your OIC explaining why you believe the actual value is $X. Remember that the IRS is required to use "quick sale" value, which is typically 80% of fair market value anyway. So if KBB shows $7800 in good condition, quick sale would be around $6240. Minus your $4100 in repairs, that's about $2140. But instead of doing that math yourself, just present all documentation and let the IRS make the determination. Being transparent and thorough is your best bet.

Just wanted to add a quick tip - when I did my OIC last year, I used the NADA guide instead of KBB for my car values. My revenue officer told me they often prefer NADA because it tends to be more conservative and realistic about used car values, especially for older vehicles with issues.