| Your Options Tax Relief Alternatives
An “Offer in Compromise” is an agreement between a taxpayer and the IRS to settle a tax liability for payment of less than the full amount owed. While this amount has varied over time, the last published report by the IRS displayed evidence that the average settlement was for only 12 cents on the dollar (e.g. taxpayers saved 88% of what they owed for accepted OICs). The Offer in Compromise program is available to “provide delinquent taxpayers with a fresh start toward future compliance with the tax laws.” While, the OIC is still a relatively new IRS instrument created 1992 by Section 7122 of the Tax Code, our team’s Tax Attorneys have extensive expertise with planning, preparing, and negotiating Offers in Compromise (“OIC”). The two primary grounds under which an OIC can be successfully negotiated with the IRS are: “doubt as to collectibility” (e.g. the taxpayer is unable to pay the full burden), or “doubt as to liability” (e.g. the taxpayer contends that they owe the debt). There is a more recent third ground for acceptance, “effective tax administration” (e.g. the IRS wants to get as much as they can, and they may potentially think that 12 cents on the dollar is as good as they can do on a taxpayer). For an Offer in Compromise to be accepted, however, the taxpayer has the burden of proof that they either have no possible means of paying the tax or that they do not actually owe the tax. The primary determinant on “doubt as to collectibility” is based on a taxpayer’s personal financial profile; including income, expenses, and assets. The IRS sets strict guidelines for income, allowable expenses (categorized as: Living, Housing, Transport), and available equity in owned assets. An additional benefit of submitting an OIC is that IRS Restructuring Act prohibits the IRS from collecting a tax liability by levy during the period in which the Offer is being processed, or 30 days following rejection of an offer, or during the appeal of an OIC. This window of non-collection is frequently a respite for our clients to avoid any IRS collection actions, thereby securing additional time for clients to pay and prevents the IRS from seizing any assets in the interim. |
Our Recent Tax Debt Settlements
| Original Amount | Settled Amount | Date |
| $48,967.00 | $4,973.00 | |
| $126,842.00 | $24,963.00 | |
| $17,843.00 | $6,924.00 | |
| $12,738.00 | $4,821.00 | |
| $83,056.00 | $1,734.00 | |
| $71,941.00 | $9,421.00 |
Tax Debt Market Statistics
Last year the IRS cancelled 3.89 million in tax debt, saving taxpayers $3.62 billion.
When tax debt is properly challenged, the IRS has canceled 60 cents of every dollar assessed in employment tax penalties.
The amount of delinquent IRS tax debt rose by 20% last year alone.
IRS tax debt enforcement activity rose by over 26% last year.
In 2007 the IRS settled tax debt for just 14.8 cents on the dollar when a proper request was made for tax debt forgiveness.
By asserting the right to a correspondence audit, the average tax audit bill was reduced by as much as 58%.
The amount of income tax debt reported owed but not collected by the IRS totaled more than $200 billion at last count - that number doubles to over $400 billion if you include the estimated taxes owed on unreported/unfiled returns.
Over 2.6 million taxpayers are on an installment plan, paying over $4.5 billion to the IRS, and successfully avoiding wage and bank levies and property seizures.
15% of all taxpayers owe back taxes.