A client contacted our office after falling behind on his taxes and accumulating over $150,000 in IRS debt. At the time, all of his tax returns had already been filed, but he was unsure how to move forward and resolve the balance. He had previously worked as an independent contractor, which led to the tax liability, but had since transitioned into a W-2 employee and was no longer accruing new tax debt. With limited assets and no clear path to repayment, he needed a solution that reflected his actual financial situation.
The Problem
Although the client had a significant balance owed, his financial condition told a very different story. He did not own any real estate, had approximately $5,000 in his bank account, and no other meaningful assets.
His average monthly income was around $5,000, but after accounting for necessary living expenses and ongoing child support obligations, he had no disposable income remaining each month.
Despite this, the IRS still expects taxpayers to resolve their balances, and without proper representation, he risked being placed into an unaffordable payment plan or facing enforced collection action.
Our Solution
At Florida Tax Solvers, we focus on aligning IRS resolutions with a taxpayer’s true ability to pay. In this case, the client’s financial profile made him a strong candidate for an Offer in Compromise.
Evaluated financial eligibility for an Offer in Compromise.
We conducted a detailed review of his income, expenses, and assets to determine whether he qualified under the IRS’s reasonable collection potential guidelines.
Prepared and submitted a strategic Offer in Compromise.
Based on his lack of assets and zero disposable monthly income, we submitted an offer that reflected his true financial condition. We presented clear documentation to support that he did not have the ability to repay the full balance.
Demonstrated limited collection potential.
By showing that the IRS would be unable to collect the full amount through standard collection methods, we positioned the case for acceptance under the IRS’s settlement criteria.
The Results
The IRS accepted the offer, and the client was able to settle over $150,000 in tax debt for just $100.
This case highlights how significantly a taxpayer’s financial situation impacts the outcome. For example, if the client had owned a home with equity or maintained substantial savings, the settlement amount would have been considerably higher. The IRS factors in assets such as home equity and bank balances when determining what a taxpayer can reasonably pay.
Every case is different, and outcomes depend on a combination of income, assets, and overall financial condition. When a full settlement is not possible, other options such as installment agreements, partial pay arrangements, currently not collectible status, or penalty abatement may be more appropriate. With the right strategy and proper financial presentation, even large tax debts can be resolved in a way that reflects what the taxpayer can truly afford.
