Offer In Compromise - Household Income Defined


#1

Hello

I have a good candidate for an OIC. I understand reporting household income includes all in the home. However, he is just renting a room. It does not seem logical to include the others in actual home. Has anyone encountered this before?

Thank you


#2

I am very interested also. Also the income of the other people that live in the house


#3

Stephanie,

I have never encountered this scenario, but will go ahead and get the discussion going… Does your client have a formal “lease agreement” that shows a fixed amount for rent, utilities, groceries, etc. (as opposed to a % of the items, or a fluctuating amount month over month)? If there is a true separation of participation (that can be proved) you may be able to argue your point to exclude the others (think of it as a stand alone apartment that happens to be located in a house). However, my guess is that there is never a true separation and you will need to include the household income.

Ronald,

I suspect that the others will be unwilling to share their income amounts. You will likely have to use a default calculation based upon the number of occupants with income in the home (ex. 2 other folks plus your client, each contributes 33.3%. 3 other people 25%, etc) and explain the inability to have accurate numbers.

Hopefully, someone who has dealt with this before can chime in and confirm or correct my contribution.

Have a great day,
Jeff


#4

Jeff and Stephanie,

Here is the definition from section 7 of the 433-A

Section 7 Monthly Household Income and Expense Information
Enter your household’s gross monthly income. The information below is for yourself, your spouse, and anyone else who contributes to your household’s income. The entire household includes spouse, non-liable spouse, significant other, children, and others who contribute to the household. This is necessary for the IRS to accurately evaluate your offer.

If the income is not shared or in common with everyone in the house then I think you could successfully argue that the “household” only consists of the individual who rents the room. Hope this helps.