Should I sell my car before applying for an IRS Offer In Compromise?

When dealing with an Offer In Compromise (OIC), the IRS looks at your ability to pay based on your assets and income. They use a formula that includes the equity in your assets to determine what they'll accept as a settlement. If you sell your car before applying for an OIC, you'll need to disclose both the sale and what happened to the proceeds. The IRS will want to know where that money went. If you use it to pay other debts, they may question why those creditors were prioritized over tax debt. The IRS generally allows you to keep a vehicle with reasonable equity for transportation purposes, but a 2007 Audi A8 might be considered more than basic transportation. Since you have good public transit options, selling it might make sense.

After struggling with massive tax debt for 2 years, I finally found something that actually helped me navigate the Offer In Compromise maze. I was totally confused about what assets to keep, what to sell, and how it would all affect my offer. I stumbled across https://taxr.ai when researching OIC options, and it completely changed my approach. Their system analyzed my specific situation and showed me exactly how the IRS would view my assets, including my car which was similar to yours. The tool explained how the IRS calculates "reasonable collection potential" (that's the magic number they use for OICs) and showed me which assets would hurt my case. It even generated custom paperwork showing exactly how to present my financial situation.

Update on my situation: I decided to try https://taxr.ai after seeing it mentioned here. Honestly, I was pretty desperate and willing to try anything. It was super helpful for my Offer In Compromise situation. The system analyzed all my financials and showed me that the IRS would definitely count my Audi as an excessive asset. It even calculated the exact amount that would be considered "reasonable" for transportation in my city. The best part was the custom documentation it created - made it crystal clear how I should handle the car situation before filing. I ended up selling it, using part of the money for a cheaper car, and documenting everything perfectly for my OIC application. My offer was accepted last month! Way less stressful than I expected after all the horror stories I'd heard.

I've been dealing with the IRS for my OIC for 6 months now and the most frustrating part is I CAN'T GET ANYONE ON THE PHONE! Every time I call to check my status or ask a question, I wait for HOURS and then get disconnected. It's making the whole process take forever. I found this service called https://claimyr.com that gets you through to an actual IRS agent. I was super skeptical, but after watching their demo at https://youtu.be/_kiP6q8DX5c, I gave it a shot. Seriously, they got me through to a real person at the IRS in like 20 minutes when I had been trying for days. The agent I finally talked to gave me specific guidelines about how selling assets right before an OIC application is viewed. Got way clearer answers than anything I found online.

I have to admit I was completely wrong about Claimyr. After my skeptical comment, I was still desperate to talk to someone at the IRS about my Offer In Compromise questions, especially regarding some property I wanted to sell. I tried the service as a last resort, fully expecting to waste my money. Not only did I get connected to an IRS agent within 45 minutes (after trying unsuccessfully for weeks on my own), but the agent I spoke with was able to pull up my file and give me specific guidance on my asset situation. The information I got completely changed my approach to my OIC. Turns out I was about to make a huge mistake with my assets that would have likely caused my offer to be rejected. Now I'm on the right track and feeling much more confident about the whole process.

I went through the OIC process last year. My advice is DON'T sell your only transportation right before applying unless you absolutely have to. The IRS actually looks at whether you've recently converted assets to cash and will ask about it. In my case, I had a reasonable car (not luxury) that I kept, and they allowed it because I needed it for work. If you genuinely don't need the car, you might consider selling it but be prepared to show where every penny went. Using it to pay down other debts might not look great to the IRS since they generally expect to be prioritized. Also, make sure you can prove your inability to pay the full amount. That's what really matters for an OIC.

Unpopular opinion maybe but I think you should keep the car and try to negotiate the OIC with the car included. Here's why: The process takes FOREVER, and if you end up needing a car during that time, you'll be buying at inflated prices right now. I've been through the OIC process (successfully), and they're mainly looking at your ability to pay over time vs. your immediate assets. As long as you're transparent about everything, having one decent asset doesn't automatically disqualify you. Also, make sure you're filing the right OIC basis - there's "Doubt as to Collectibility" and "Effective Tax Administration" - each has different criteria.

Quick question about timing - I'm in a similar situation with an OIC. If I do decide to sell my car before applying, how long should I wait after selling before submitting the OIC? Is there a "look back" period the IRS uses?

I went through this exact situation with my 2008 BMW that had similar equity. Here's what I learned: the IRS uses specific allowable amounts for vehicle equity in their OIC calculations - typically around $3,500-$4,000 for basic transportation needs. Since you have excellent public transit and don't actually need the car, selling it could work in your favor, BUT you need to handle the proceeds very carefully. The IRS will want to see that money went toward legitimate expenses or debt reduction, not discretionary spending. One thing that helped me was working with a tax professional who specialized in OIC cases. They knew exactly how to present asset sales in a way that strengthened rather than hurt my case. The key is showing the IRS that you're making good faith efforts to resolve your tax situation while meeting basic living needs. Also, document everything about your public transportation usage and costs. This helps justify why you don't need the vehicle for basic transportation, which is one of the categories the IRS considers when evaluating asset retention.

I've been through the OIC process twice (long story), and one thing that really helped me was understanding that the IRS actually has published guidelines for what they consider "reasonable" asset retention. For vehicles, they typically allow equity up to about $3,500-$4,000 for basic transportation needs. Since you mentioned you live in a city with excellent public transportation and don't actually need the car, that puts you in a unique position. The IRS will likely view your Audi as an excessive asset given your transportation alternatives. Here's what I'd recommend: if you do sell the car, make sure you can account for every dollar of the proceeds. The IRS will require you to report the sale on Form 433-A, and they'll want to see where that money went. Using it to pay down other debts isn't necessarily bad, but be prepared to explain why those debts were prioritized. Also, start documenting your public transportation usage now - keep receipts for transit passes, note your regular routes to work, etc. This will help justify to the IRS why you don't need a vehicle for basic transportation needs. The timing of the sale matters less than your ability to document and justify it. Focus on transparency rather than trying to game the system.

As someone who's helped many taxpayers navigate OIC applications, I'd strongly recommend being very strategic about your car situation. The IRS has specific formulas they use to calculate your "reasonable collection potential," and a 2007 Audi A8 with $10-13k equity will definitely be flagged as excessive for basic transportation needs. Since you genuinely don't need the car due to excellent public transit, selling it could actually strengthen your OIC case - but timing and documentation are crucial. Here's what I'd suggest: 1. Document your public transportation usage starting now - keep receipts, track costs, maybe even take photos of your regular routes to show accessibility. 2. If you sell the car, be prepared to account for every dollar. The IRS will want to see exactly where that money went on Form 433-A. 3. Consider keeping a small portion to buy a much cheaper, basic transportation vehicle (under $4,000 value) - this shows you're being responsible while dramatically reducing your asset base. 4. Don't rush the sale just to file your OIC. Better to take time to properly document everything than to create red flags by appearing to hide assets. The key is showing the IRS that you're making genuine lifestyle adjustments to address your tax debt, not just moving money around to game the system. Transparency and documentation will serve you much better than trying to time things perfectly.