Is it Really Possible to Settle With the IRS for Pennies on the Dollar?

Taxpayers in trouble with the IRS often ask me if it is really possible to settle with the IRS for pennies on the dollar.

It depends!

Are you a glass half-empty type of person, or a glass half-full?

It’s hard to miss all those late-night TV commercials that offer to get you off the hook with the IRS for just a fraction of what you owe. National tax resolution companies advertise heavily.

cardiac-217140_1280My favorite ad used to feature a handsome young actor in a white doctor’s lab coat holding up a sign that read “$20,000”, while the voice-over talent claimed that his $1,000,000 IRS debt was settled for–you guessed it–pennies on the dollar. (The company running the ad is no longer in business.)

The glass half-empty perspective

What the commercials are talking about is getting the IRS to accept an Offer in Compromise (OIC). The reality is 60% of the time the IRS rejects such an offer. That’s the glass half-empty perspective.

Of course, the glass half-full perspective affirms that 40% of the offers are accepted. And the truth is properly structured Offers are accepted when they demonstrate that a taxpayer’s “Reasonable Collection Potential” is low.

A handsome, healthy young doctor with 30 years-plus of extremely high income potential is not likely to have an Offer in Compromise accepted by the IRS.

At the other extreme…

A taxpayer with the same IRS debt, but with health problems, less education, less assets, and lower income potential than the handsome young doctor will have a higher likelihood of having an OIC accepted.

money-235586_150Unfortunately, the people targeted by the TV ads do not know this. They’re stressed out, running scared, and hooked by the promise of an quick and easy solution. So they call the toll-free number and are connected with a high-pressure salesperson. They’re assured the firm will do miracles and make their IRS problem disappear, just as soon as they pay an up-front retainer of $5,000-$10,000.

In too many cases, it’s the tax resolution firm that disappeared, not the tax problem.

It doesn’t pay treat your tax problem like a game of high-stakes poker.  

If you have the money to pay the IRS–or will likely have it in the future–then you can be sure IRS collectors have figured that out. No amount of bluffing, no amount of negotiating will get them to settle for less than you owe. That being said, there are cases where an Offer in Compromise is indeed an appropriate solution to your IRS problem.

It all depends on the specifics of your particular situation. Even if an OIC is the perfect solution for you, it’s not a quick and easy one. The IRS Collection Division will typically take 6-12 months to thoroughly review your Form 656 Offer in Compromise and all the supporting documentation required to go along with it.

It also doesn’t pay to handle your tax problem  like a weekend “do-it-yourselfer” 

Many taxpayers start out trying to handle their IRS Offer in Compromise themselves (or with their current CPA or attorney) but end up with negative results, or no results at all. It’s a very specialized area of practice, and you could benefit from the assistance of an Enrolled Agent or tax attorney experienced in Offers in Compromise, and who has the expertise to complete the IRS forms and represent your case before the IRS in the strongest possible manner.

ANCHOR ON THIS: It really is possible to put your IRS problem behind you, permanently. But it’s not always possible to do it with an Offer in Compromise. The program best-suited to resolve your tax matter will depend on a number of factors. Your best move is to consult with a professional who specializes in IRS Representation to determine what’s possible–and what’s not–for your particular situation.

1 in 6 Virginia Residents Has a Tax Problem

One in six Virginia residents has a tax problem of one sort or another.

Of these, half owe more than $10,000 in taxes.

It’s easy for problem-98377_150good, hard-working Americans to fall behind. That’s why we’re here. An IRS or Virginia problem has a way of affecting every aspect of your life; your finances, your credit rating, your family relationships, even your health. If you’re losing sleep over unpaid taxes, delinquent returns, or other tax matters, we can help you get tax relief now.

Some Virginia Department of Taxation and/or IRS problems can be easy to fix. But if…

  • you owe $10,000 or more in back taxes, or
  • have fallen behind a couple years in your tax filings, or
  • own a business with unpaid payroll taxes,

…then your situation is more complex. We’ve come across many people in these situations who have tried to handle their IRS situation themselves, or through a tax attorney or CPA, but didn’t receive the tax relief help they were seeking. That’s when it pays to seek professional representation.

virginia irs tax problem
virginia irs tax problem

IRS representation involves dealing with IRS collection procedures from a place of power and authority. An Enrolled Agent is a specialist in this area; he or she is authorized to represent taxpayers in all 50 states before all levels of the Internal Revenue Service. It’s a very specialized area of practice, and one in which most Attorneys, CPAs or Tax Preparers lack the know-how, and quite frankly the interest, to deal with.

A professional can help you find the best solution for your particular situation, including any of the following Tax Resolution Services:

  • Offers in Compromise
  • Installment Agreements
  • IRS Appeals
  • Financial Hardship Plans
  • Bank Levy/Paycheck Releases
  • Innocent Spouse Relief
  • Penalty Abatement
  • Delinquent Returns
  • Payroll Tax Relief
  • Trust Fund Recovery
  • Currently Not Collectible Status

Now is the time to get the info you need to gain relief from your IRS problem. You really can solve your tax matter permanently. You deserve a fresh start, so contact us today, and learn how.



Can an Offer In Compromise Work for You?

The Offer In Compromise (or “OIC”) is an IRS program which allows qualified individuals with an unpaid tax debt to negotiate a settled amount that is less than the total owed. If accepted, you are able to pay your full tax bill in one small, final payment.

If you’ve evstreet-363265_150er seen a TV ad where a national tax relief firm talks about settling your debt for ‘pennies on the dollar’, the OIC program is what they’re referring to. And who wouldn’t get excited about such a possibility? The good news it IS possible; the bad news is many taxpayers have been burned by nationally advertised tax relief companies. Many have simply failed to deliver on their promises.

That doesn’t mean you can’t get a fresh start with an OIC. It really is possible. It depends on the professional your’re working with. It also depends on your individual situation.

At least one of three conditions must be met to qualify a taxpayer for consideration of an Offer In Compromise settlement:

  • Doubt as to Liability — Debtor can show reason for doubt that the assessed tax liability is correct
  • Doubt as to Collectibility — Debtor can show that the debt is likely uncollectable in full by the IRS under any circumstances
  • Effective Tax Administration — Debtor does not contest liability or collectibility, but can demonstrate extenuating or special circumstances that the collection of the debt would create an economic hardship or would be unfair and inequitable.

A taxpayer uses the checklist in the IRS Form 656, Offer in Compromise, package to determine if the taxpayer is qualified for the offer in compromise program. You have to be able to prove that you have no reasonable way to pay the full amount. You could be much better off engaging an Enrolled Agent to help work this strategy for you because taxpayers who try this on their own, without knowing the current guidelines and enforcement standards, often put themselves at risk of not qualifying for a settlement or paying more than the lowest amount allowed by law.