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CBS News
6 hours ago
- Business
- CBS News
Offer in Compromise: What you need to know
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. If you owe money to the IRS, an Offer in Compromise could help you reduce your total tax burden. Getty Images/iStockphoto Tax season might be behind us, but for millions of Americans, the stress of unpaid tax bills still lingers. But whether it's due to an issue with unexpected income, a missed payment to the Internal Revenue Service (IRS) or penalties that have grown out of control, owing money for back taxes can put you in a tough spot. After all, the IRS has powerful tools it can use to try and collect what you owe, so the concern over things like wage garnishments and bank levies, as well as mounting interest, can make you wonder if there's any way out of the financial hole. But while the IRS has a reputation for being relentless when it comes to collecting unpaid taxes, the tax agency understands that not everyone has the means to pay off their full tax bill. That's where the Offer in Compromise program comes in. This lesser-known tax relief option allows qualified taxpayers to settle their tax debt for significantly less than the full amount owed. It won't make all your tax problems disappear, of course, but it can provide genuine relief and a fresh start. The catch? The IRS doesn't hand out these deals to just anyone. They have strict criteria and a thorough evaluation process, so understanding how this program works before applying could be the difference between years of financial stress and finally dealing with your unpaid tax debt. Find out how to start tackling your unpaid tax debt today. What is an Offer in Compromise? An Offer in Compromise is essentially a settlement agreement between you and the IRS. Instead of paying your full tax debt, you negotiate with the IRS to pay a reduced amount — one that the IRS agrees is the most it can collect from you. Think of it as the tax equivalent of settling a credit card debt, except the IRS has much stricter standards and more thorough investigation processes. The program exists because the IRS recognizes that sometimes collecting the full amount owed isn't realistic or in anyone's best interest. So, if you're genuinely unable to pay your full tax debt without creating financial hardship, and your offer reflects your true ability to pay, the IRS may accept it to close out your case and move on. Learn what tax relief options are available to you now. Who qualifies for an Offer in Compromise? Not everyone qualifies for an Offer in Compromise, and meeting the basic criteria doesn't guarantee approval. The IRS evaluates your eligibility based on your: Ability to pay Income Expenses Asset equity If your financial records show you could reasonably make monthly payments through an installment plan or pay in full with asset liquidation, your Offer in Compromise will likely be denied. You also must have filed all required tax returns and made any necessary estimated payments for the current year. And, if you're in an open bankruptcy proceeding, you're automatically disqualified. How much should you offer to the IRS? This is one of the trickiest parts of the process. The IRS has a specific formula for calculating your reasonable collection potential, and your offer needs to equal or exceed this amount. They'll examine your monthly disposable income and multiply it by either 12 or 24 months, depending on how you plan to pay. Then they'll add the equity in your assets. For example, if you have $200 in monthly disposable income and choose to pay your offer over 24 months, that's $4,800. If you have $10,000 in asset equity, your minimum offer would be $14,800, even if you owe $50,000 in taxes. The key to having your offer accepted is being realistic and honest about your finances. Lowball offers that don't reflect your true ability to pay will be rejected and you'll lose your application fee in the process. How do you apply for an Offer in Compromise? Applying for an Offer in Compromise requires substantial paperwork and documentation. You'll need to complete Form 656 (the actual offer) and Form 433-A or 433-B (detailed financial statements). The IRS will also want to see bank statements, pay stubs, asset valuations and proof of monthly expenses. There's also a non-refundable application fee and an initial payment that needs to be made with your offer. If you're making a lump sum offer, you must include 20% of the offer amount. For periodic payment offers, you must include the first month's payment and continue making payments while your offer is under review. The review process typically takes six to 24 months. During this time, the IRS may request additional documentation or propose changes to your offer. They might also send a revenue officer to verify your financial information in person. What mistakes could lead to rejection? Most offers get rejected because applicants either don't qualify financially or make errors in their applications. Some people try to hide assets or underreport income, which leads to automatic rejection and potential fraud penalties. Others fail to account for all allowable expenses or don't provide sufficient documentation to support their financial claims. The IRS is thorough in its review, so incomplete or inconsistent information will derail your application. Another common mistake is applying too early. If you're still able to pay through an IRS-approved installment agreement or other means, the IRS will reject your offer and suggest those alternatives instead. The bottom line An Offer in Compromise can provide life-changing relief for taxpayers who genuinely cannot pay their full tax debt, but it's not a program that will work for (or be available to) everyone. The IRS accepts less than half of all applications, and the process requires patience, honesty and detailed financial documentation. Before pursuing this option, consider whether you might qualify for other programs, like installment agreements or currently not collectible status, which might be easier to obtain and serve your needs just as well. If you do decide to apply, consider working with a qualified tax debt professional who can help navigate the complex requirements and improve your chances of success.
Miami Herald
7 hours ago
- General
- Miami Herald
‘I was stunned.' 9 lottery players try their luck — and win big prizes
National 'I was stunned.' 9 lottery players try their luck — and win big prizes Annette Smith turned a routine coffee stop into a $50,000 Pick 5 win by playing her favorite birthday numbers. A grandpa in Bel Air had to double-check his $8 Powerball ticket before believing he scored $50,000. Meanwhile, a Washington casino guest took a different gamble, buying a Lotto ticket and winning a massive $1.3 million jackpot. Read the stories below. A lottery player hit the jackpot on a game bought at the Muckleshoot Casino Resort in Auburn, Washington. Getty Images/iStockphoto NO. 1: CASINO PLAYER WINS $1.3 MILLION JACKPOT IN WASHINGTON — BUT NOT THE WAY YOU THINK The lucky lottery player has 180 days to claim their prize. | Published June 28, 2024 | Read Full Story by Helena Wegner Lottery file photo By TIM DOMINICK NO. 2: SC MAN DIDN'T BELIEVE HE WON LOTTERY GAME'S GRAND PRIZE UNTIL THE CHECK WAS IN HIS HANDS The odds of winning the six-figure jackpot were 1-in-960,000. | Published July 3, 2024 | Read Full Story by Noah Feit A man won big and is closer to buying a home thanks to a lucky lottery ticket in Maryland. Photo by Sandy Millar via Unsplash NO. 3: MAN DREAMING OF BUYING A HOME WINS BIG LOTTERY PRIZE IN MARYLAND. 'I WAS STUNNED' 'The happy man has been working toward buying a house and reports that the prize will help him with his goal.' | Published July 8, 2024 | Read Full Story by Brooke Baitinger North Carolina lottery players won prizes ranging from $100,000 to $390,000. N.C. Education Lottery NO. 4: $390,000 LOTTERY PRIZE AMONG SEVERAL BIG WINS ACROSS NC. WHERE WERE THE TICKETS SOLD? Here's what to know about the state's lucky weekend. | Published July 15, 2024 | Read Full Story by Simone Jasper A Georgia lottery player just missed the Powerball jackpot, but still won a sizable prize, officials said. Jerry Habraken USA TODAY NETWORK NO. 5: POWERBALL PLAYER WINS BIG IN GEORGIA, OFFICIALS SAY. WHERE WAS THE LUCKY TICKET SOLD? Check your tickets! | Published July 22, 2024 | Read Full Story by Tanasia Kenney A grandpa won big after buying an $8 lottery ticket, Maryland officials said. Getty Images/iStockphoto NO. 6: GRANDPA PLAYED LOTTERY FOR 'YEARS AND YEARS' IN MARYLAND. THEN HE LANDED BIG WIN The man was 'unsure' and needed confirmation when he first learned of the win, officials said. | Published July 22, 2024 | Read Full Story by Paloma Chavez The woman won big on a Pick 5 ticket, which she bought during a coffee stop, using her birthday numbers, Maryland Lottery officials said. Photo from Maryland Lottery NO. 7: LOTTERY PLAYER'S BIG MARYLAND WIN LEAVES HER 'SCREAMING AT THE TOP OF HER LUNGS' 'I never imagined winning such a big prize.' | Published July 29, 2024 | Read Full Story by Daniella Segura Dedicated lottery player celebrates biggest win in over 15 years, Maryland officials said. Getty Images/iStockphoto NO. 8: LOTTERY PLAYER HAD 'SOME LUCK' OVER 15 YEARS, BUT 'NOTHING LIKE' LATEST MARYLAND PRIZE The winner was so 'stunned' at the site of the number she scanned the ticket several times to confirm, officials said. | Published March 11, 2025 | Read Full Story by Brooke Baitinger A Missouri woman considered the number 23 unlucky until she passed on a winning lottery ticket with that number to her husband. GETTY IMAGES NO. 9: WIFE SAW 'UNLUCKY' NUMBER ON LOTTERY TICKET AND GAVE IT TO HUSBAND — BUT THEY WON BIG 'What I've learned is that there is no unlucky number!' the Missouri woman said. | Published March 14, 2025 | Read Full Story by Rhiannon Saegert The summary above was drafted with the help of AI tools and edited by journalists in our News division. All stories listed were reported, written and edited by McClatchy journalists.
Miami Herald
7 hours ago
- General
- Miami Herald
10 lottery players win life-changing prizes across US. ‘Had to calm myself down'
National 10 lottery players win life-changing prizes across US. 'Had to calm myself down' A man couldn't believe his eyes when he checked his Lucky for Life ticket after waking up at 2:30 a.m. A Maryland grandfather's persistence finally paid off after decades of using the same "non-winning" numbers in Bonus Match 5. Meanwhile, a Georgia player narrowly missed a $133 million Powerball jackpot but still walked away with a $50,000 prize. Read the stories below. A Michigan man woke up at 2:30 a.m. and checked the winning lottery numbers to learn that he was a big winner. He thought he was dreaming. Photo by Michigan lottery NO. 1: LOTTERY WINNER THOUGHT HE WAS DREAMING AFTER CHECKING NUMBERS AT 2:30 A.M. IT WAS REAL 'It really was hard to know if I was dreaming or if I had really won big because it was the middle of the night,' he told Michigan officials. | Published May 7, 2024 | Read Full Story by Kate Linderman A Mega Millions ticket sold in California matched five numbers to win $943,692, just missing the $421 million jackpot. Vladimir Sukhachev Getty Images/iStockphoto NO. 2: MEGA MILLIONS PLAYER WINS NEARLY $1 MILLION IN CALIFORNIA. WHERE WAS LUCKY TICKET SOLD? The winning ticket matched five numbers but not the Mega Ball, lottery officials say. | Published May 22, 2024 | Read Full Story by Don Sweeney The winning ticket just sat chilling in a drawer for months. Photo courtesy of Michigan Lottery Connect news release NO. 3: LOTTERY TICKET SAT IN DRAWER FOR MONTHS BEFORE MAN REALIZED IT WAS WORTH MILLIONS The Michigan scratcher sat 'collecting dust' for months, lottery officials said. | Published May 23, 2024 | Read Full Story by TJ Macias A woman who paid $50 for a lottery ticket started screaming and running around the store when she won $1 million, NC officials say. Getty Images/iStockphoto NO. 4: GRANDMA OF 13 WAS 'HOLLERING AND RUNNING' IN STORE AFTER LIFE-CHANGING NC LOTTERY WIN The ticket cost $50. | Published May 29, 2024 | Read Full Story by Mark Price A Maryland man's faithful set of lottery numbers finally paid off. Getty Images/iStockphoto NO. 5: GRANDPA'S FAITHFUL LOTTERY NUMBERS FAILED HIM FOR DECADES — UNTIL NOW. 'ABOUT TIME' 'I jumped up for joy,' the Maryland man said. | Published June 10, 2024 | Read Full Story by Daniella Segura Donna Smith, pictured with her fiance Calvin Blackwood, hit the jackpot in North Carolina. N.C. Education Lottery NO. 6: LOTTERY PLAYER TRUSTS GUT AND WINS LIFE-CHANGING NC JACKPOT. 'HAD TO CALM MYSELF DOWN' The prize winner 'could barely contain her excitement.' | Published June 20, 2024 | Read Full Story by Simone Jasper Heeding her intuition, a Maryland woman took a 'rare trip' to a Baltimore gas station and bought some Powerball tickets, lottery officials said. Getty Images/iStockphoto NO. 7: LUCKY FEELING LEADS TO 'FATEFUL DAY' FOR MARYLAND LOTTERY PLAYER. 'A BLESSING' 'Life is a gamble, and it's good to take risks.' | Published July 22, 2024 | Read Full Story by Daniella Segura Someone in Georgia scored a big prize in the latest Powerball drawing. How much did they win? Jerry Habraken USA TODAY NETWORK NO. 8: POWERBALL PLAYER JUST MISSES $133 MILLION JACKPOT, BUT STILL WINS BIG PRIZE IN GEORGIA Where was the lucky ticket sold? | Published July 29, 2024 | Read Full Story by Tanasia Kenney A Maryland lottery player won big after listening to advice from a family member, lottery officials said. Getty Images/iStockphoto NO. 9: RELATIVE'S ADVICE LEADS LOTTERY PLAYER TO A HUGE WIN. 'IT WAS LIKE HOLDING DYNAMITE' The Maryland lottery player said she was considering a different game, but her relative had a game plan, according to lottery officials. | Published February 11, 2025 | Read Full Story by Natalie Demaree A Wisconsin truck driver passing through Virginia purchased a pair of lottery tickets and won a top prize on the second ticket, lottery officials said. Getty Images/iStockphoto NO. 10: TRUCK DRIVER BUYS LOTTERY TICKET OVER 800 MILES FROM HOME — AND WINS 'BIG ONE' He bought a pair of scratch off tickets and won the top prize on the second one, lottery officials said. | Published April 8, 2025 | Read Full Story by Natalie Demaree The summary above was drafted with the help of AI tools and edited by journalists in our News division. All stories listed were reported, written and edited by McClatchy journalists.
Miami Herald
7 hours ago
- General
- Miami Herald
These 7 lottery players tried their luck — and won big prizes. See their stories
National These 7 lottery players tried their luck — and won big prizes. See their stories Ordinary errands, lucky instincts and sudden splurges led these everyday folks to jaw-dropping lottery prizes. This list of stories outlines how a man's spontaneous stop at a Sheetz in Maryland landed him $250,000, while another player in Florida turned a $5 Cash Wheel ticket bought at a 7-Eleven into $1 million. Read the stories below. A man won big after buying a last-minute lottery ticket in Maryland, officials said. Getty Images/iStockphoto NO. 1: 'THIS CAN'T BE RIGHT.' MAN BUYS LAST-MINUTE LOTTERY TICKET AND WINS BIG IN MARYLAND 'I was about to leave when I thought to myself, 'Why not?'' | Published May 16, 2024 | Read Full Story by Paloma Chavez A record-breaking lottery ticket was sold in South Carolina. Getty Images/iStockphoto NO. 2: LOTTERY PLAYER WINS HISTORIC JACKPOT PRIZE IN SOUTH CAROLINA. WHERE WAS TICKET SOLD? The lucky player's ticket matched all numbers picked in a recent drawing. | Published May 21, 2024 | Read Full Story by Simone Jasper Pamela Arscott won a $1 million lottery prize, but thought it was a mistake. Illinois Lottery NO. 3: GREAT-GRANDMA CREDITS LATE HUSBAND IN BIG ILLINOIS LOTTERY WIN. 'A BLESSING FROM HIM' 'I thought it was a mistake,' the woman said of her big win. | Published July 1, 2024 | Read Full Story by Mike Stunson A Powerball player in Georgia scored a life-changing win in the lottery game's latest drawing, officials say. Photo by Giorgio Trovato via Unsplash NO. 4: POWERBALL PLAYER WINS $2 MILLION PRIZE IN GEORGIA. WHERE WAS THE LUCKY TICKET SOLD? Check your numbers! | Published July 25, 2024 | Read Full Story by Tanasia Kenney A man won a huge prize after buying a $50 scratch-off in Idaho, lottery officials said. NO. 5: MAN SWITCHES IT UP AND PLAYS 'BIG TICKETS' LOTTERY GAMES. IT LED TO A 'SURREAL MOMENT' 'Brain. Blown! Pwooff,' the Idaho winner said. | Published October 10, 2024 | Read Full Story by Paloma Chavez A Missouri man thought he won $50,000, but his prize was worth much more. Getty Images/iStockphoto NO. 6: LOTTERY PLAYER THINKS HE WON $50K. THEN HE LEARNS MISSOURI TICKET IS WORTH A LOT MORE He turned out to be 40 times as lucky. | Published January 17, 2025 | Read Full Story by Rhiannon Saegert An Orlando man won a jackpot prize of $1 million in a scratch-off game he bought at a local 7-Eleven, the Florida Lottery announced. Getty Images/iStockphoto NO. 7: LOTTERY PLAYER TURNS $5 INTO LIFE-CHANGING PRIZE AT FLORIDA 7-ELEVEN. HERE'S WHERE The odds of winning jackpot in the game are 1-in-2,963,170. | Published February 25, 2025 | Read Full Story by Olivia Lloyd The summary above was drafted with the help of AI tools and edited by journalists in our News division. All stories listed were reported, written and edited by McClatchy journalists.
CBS News
8 hours ago
- Business
- CBS News
$200,000 home equity loan vs. $200,000 HELOC: Which is less expensive now?
We may receive commissions from some links to products on this page. Promotions are subject to availability and retailer terms. Before borrowing hundreds of thousands of dollars worth of home equity, owners should calculate their potential repayment costs. Getty Images/iStockphoto The average home equity level has been consistently rising in recent years, and according to recent reports, it has remained at a steadily high level. The cumulative home equity level in the United States hit a record high of $17.6 trillion in the first quarter of 2025, based on a report released earlier in June. The average homeowner, meanwhile, has over $300,000 worth of equity that they can borrow from with a home equity loan or home equity line of credit (HELOC). Accounting for the 20% equity threshold many lenders prefer borrowers maintain in their home at all times, that still leaves more than $200,000 worth of equity to utilize right now. And with inflation stubborn, if significantly cooled, interest rates still high and economic concerns broad now, this could be one of the better ways to borrow a large, six-figure sum of money. To ensure borrowing success, however, which is critical when utilizing your home as the funding source, you should first calculate your potential repayment costs. Failure to pay here could result in your home being foreclosed on. So you'll want to know exactly what you'll pay long term. And with rates on home equity loans and HELOCs different, both in how high they are and how they're structured, it's particularly important to compare the potential costs of both before getting started. But which is less expensive now: a $200,000 home equity loan or a $200,000 HELOC? That's what we'll examine below. Start by seeing how much home equity you could potentially borrow here. $200,000 home equity loan vs. $200,000 HELOC: Which is less expensive now? In June 2025, the repayment costs of a home equity loan and HELOC, no matter the amount borrowed, are essentially the same. With the median home equity loan rate at 8.25% and the average HELOC rate at 8.25%, you won't see a material difference in repayments right now. But that's this month, not long-term. Since home equity loan rates have fixed rates that won't change until refinanced and HELOCs have variable rates that change over time, this similarity is not likely to stay consistent. Here's what they would look like calculated against 10- and 15-year repayment periods now, assuming the HELOC rate remains unchanged: 10-year home equity loan at 8.25%: $2,453.05 per month $2,453.05 per month 15-year home equity loan at 8.25%: $1,940.28 per month 10-year HELOC at 8.27%: $2,455.18 per month $2,455.18 per month 15-year HELOC at 8.27%: $1,942.61 per month And here's how they would compare if HELOC rates decline by 25 basis points during this time: 10-year home equity loan at 8.25%: $2,453.05 per month $2,453.05 per month 15-year home equity loan at 8.25%: $1,940.28 per month 10-year HELOC at 8.02%: $2,428.67 per month $2,428.67 per month 15-year HELOC at 8.02%: $1,913.61 per month And here's what they would look like if HELOC rates rise by 25 basis points from today's averages: 10-year home equity loan at 8.25%: $2,453.05 per month $2,453.05 per month 15-year home equity loan at 8.25%: $1,940.28 per month 10-year HELOC at 8.52%: $2,481.85 per month $2,481.85 per month 15-year HELOC at 8.52%: $1,971.82 per month In short, a $200,000 home equity loan is marginally less expensive than a $200,000 HELOC is now. But that dynamic can and almost assuredly will change over a multiple-year repayment period. Borrowers will need to weigh those changes, then, against what they can lock in with a fixed home equity loan rate instead. And remember that home equity loans and HELOCs can always be refinanced in the future, should the rate climate or your borrowing needs change, so don't get too focused on long-term rate change scenarios, either. Compare your HELOC and home equity loan rate offers here to learn more. The bottom line $200,000 home equity loans and HELOCs come with similar payments now but they may not stay that way for very long, thanks to the latter's variable rate. That noted, HELOCs come with interest-only payment requirements for borrowers who want to utilize their equity that way during the draw period, so interest rates may be less of a concern than they'd be with a home equity loan which requires full monthly repayments immediately thanks to the disbursement of the funds in a single, lump sum. Compare both options carefully before getting started, then, to better ensure borrowing success both now and in the years to come.
