The Truth About Offers In Compromise

In the real world, people and businesses settle for less all the time. So when they come to me with a tax problem, they want to know if they can make a deal with the IRS.

Who would turn down $90,000 to resolve a $100,000 debt? The IRS, that’s who.

Think about it. If the government would always let you settle your balance for less, no one would pay their taxes on time. You would just take an interest free loan from the IRS.

So for people who can afford it, the IRS wants all of the money owed, including penalties and interest. But what about those who truly do not have the ability to pay? Well, those folks may be eligible to make a really great deal through an Offer in Compromise.

The concept of the OIC is that the IRS will never be able to get all of the money owed, so they should take everything they will ever get now. The taxpayer must offer 100% of cash and savings, 80% of the value of all property, and the amount of money the taxpayer has left over every month after paying what the IRS believes are reasonable expenses multiplied by 12. It is a little more complicated than that, but that is the general formula.

Some people are just not eligible. They own too much or earn too much. For others, we can get an agreement where they pay as little as $100 to settle the entire debt. The IRS reported acceptance rate is 42%, but our success rate is over double that because we submit Offers for those who truly qualify for the program.

It does not seem fair that some people pay everything they owe and others get off the hook for almost nothing, but as long as the IRS is accepting Offers in Compromise, we will be submitting them.