How Much Should You Offer IRS To Settle Back Tax Debt

How Much Should You Offer IRS To Settle Back Tax Debt

Posted on by Michael Sullivan Fresh Start Tax Expert



As former IRS agents and managers, we can help you find different options to settle your back tax debt with the Internal Revenue Service. Call us first,   1-866-700-1040


As a former IRS agent and teaching instructor I worked the offer in compromise program & instructed new agents how to accept or decline offers in compromise.

I am a true expert in the field on how to settle IRS back tax debt.

The offer in compromise is a tricky document that requires excellent documentation, good timing and  skill to know whether an offer in compromise should be filed at all.

There are different ways to settle IRS tax debt and the following article will go ahead and allow you to see the different ways.

The offer in compromise stands alone because of the technical aspect of the acceptance of the offer.

The offer in compromise has a pre-qualifier tool and each individual should use the pre-qualifier tool themselves or contact a true tax professional who can help them to determine the best case scenario with the lowest possible settlement.

Each taxpayer is different with a different set of facts and circumstances and there is no blanket answer on how much you should offer IRS.

There’s certain formulas that apply in one must know the formulas also, some planning that may help you push the offer through for the lowest possible dollar.



Here are generally three options, payment agreements, current hardship statuses, and settlements.

Some people may want to look at the statue of limitations on their cases but we can go over every option and bring a quick resolution and remedied your case. For others, a bankruptcy may apply.

The Internal Revenue Service generally has a 10 year statute of limitations on all IRS collection cases. You can contact us to find out what the exceptions are.




We have money back guarantees and are experts for the very best settlements and options.

We have over 100 years of direct working experience with the IRS.We know every possible solution and can provide every possible remedy to get you the best result possible.

We worked as former IRS agents, managers, and tax supervisors in the local IRS offices.

Let our years of experience be your best friend to get you the results that you need.

You will never speak to the Internal Revenue Service.

The first step to lower stress and lower debt is to contact former IRS agents who know the system.

If you owe $15,000 or more in taxes, or you have on unfiled tax returns, you need to hear about the IRS programs available to you.

6.5 million Americans are falling in tax debt every year and the other countless million who have not filed their yearly tax returns.

If you are one of them, you understand about the stress and frustration of having to deal with the IRS.

The IRS can hold on to your refund, take a chunk of your pay, put a federal tax levy or garnishment on your bank account, seize and sell your property and revoke your passport.

IRS also can take 15% of your Social Security check, a benefit that’s off-limits to private creditors.

The Internal Revenue Service is the largest and most vicious tax collection agency in the world. But you do not have to worry about them we how to control the beast because of our years of experience.

If you know the system you will found the IRS actually working with you not against you.
There are tax relief programs available.

A simple call the to our office and speak directly to a tax professional can assure you that this process is not as nearly as complicated as you think.


Why does the Internal Revenue Service want to settle your tax debt for pennies on the dollar?


1.IRS resources are very constrained.

Five years of budget cuts by Congress has limited the IRS’ ability to enforce its own laws.

The IRS budget has been reduced by $1.2 billion since 2010 despite having 12.8 million more tax returns to process.

Since 2010, the IRS has laid off 17,000 workers, which explains why, in 2015, the IRS only audited 0.7% of all tax returns.

Actually, we have a former IRS agent who recently retired and can go through a litany of other reasons why IRS would settle your tax debt.

Just know this is in the best interest of the government to do so.

Congress looks at IRS numbers at the end of every year and many times budgets of the Treasury Department based on the collection statistics from the Internal Revenue Service.

2.You may have heard that the IRS only has 10 years to collect taxes.

These time restrictions put a lot of pressure on already overworked IRS agents.
Also it is called return on investment. The IRS wants to collect something on a debt that they may never be able to collect.

You will get you the best deal possible whether it’s our firm or another firm always go with former IRS agents.

IRS tax relief programs help taxpayers by reducing the amount they owe, giving them more time to pay, or a combination of both. It’s a win-win for the IRS and taxpayers.
What type of IRS tax Debt relief options are there?


There are several tax relief programs taxpayers can apply for, but only three that offer debt forgiveness:


1. The Offer in Compromise program,
2. The Partial Pay Installment Agreement program,
3. The Currently noncollectable, hardship.

Your current financial statement on form 433A or 433F will determine how IRS will closer settle your case.Caution must be taken giving IRS a financial statement.Must sure a tax professional reviews first.


The Offer in Compromise Program, IRS TAX DEBT SETTLEMENT


AIRS offer in compromise is a settlement where the IRS accepts less than the total debt amount in exchange for a lump sum or up to two years of monthly payments.

As far as debt forgiveness goes, offers in compromise are usually the best deal available to taxpayers.

The problem is it’s not easy to meet IRS eligibility criteria. There is also a pre-qualifier program to make sure you are eligible for settlement.

I was a former IRS agent who taught the offer in compromise program to new agents. I am one of the nation’s leading experts in the offer in compromise.

However, since 2010, the IRS has relaxed its standards through the fresh start initiative.


In 2015, the IRS accepted 40.3% of all offers in compromise for an average settlement of $9000 a case.


The acceptance rate is even higher for taxpayers who hire a tax relief company. It’s common for tax relief firms to maintain acceptance rates of over 85%.

Partial Pay or Monthly payments Installment Agreement

The Partial Pay Installment Agreement does not get much attention and publicity, but it often has even better terms than offers in compromise.

40% of all open IRS cases are placed in payment agreement status but sadly over 50% of taxpayers cannot keep up their payments.

A Partial Pay Installment Agreement is similar to an Offer in Compromise in that the IRS forgives part of your debt, but it has longer repayment terms: typically, 36 to 72 months.

Partial Pay Installment Agreements are easier and faster to qualify for and you don’t have to provide as much financial information.

However if your debt is over $50,000 IRS will require a complete documented financial statements.

The Hardship Program, Currently Non collectable. 40% of open collection cases are put in this classification.

The hardship program simply means you do not have the currently the means to deal with Internal Revenue Service.

After the Internal Revenue Service reviews your current financial statement and based on the national, local, and geographical standards, IRS will find that you are upside down in place you in a currently non-collectible status.

What that means is that IRS puts a freeze on your case for two or three years and will look at the situation later.

Many times a taxpayer stays in this uncollectable status for several years and at some point in time the statute of limitation may run out, contact us for more details.
Do you have Unfiled tax returns? Very Important issue with the IRS

You Must have all tax return filed and update to date on the IRS Cade2 computer system.



The  IRS Offer in Compromise


An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer’s tax liabilities for less than the full amount owed. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won’t qualify for an OIC in most cases. shift

 To qualify for an OIC, the taxpayer must have filed all tax returns, made all required estimated tax payments for the current year, and made all required federal tax deposits for the current quarter if the taxpayer is a business owner with employees.

In most cases, the IRS won’t accept an OIC unless the amount offered by a taxpayer is equal to or greater than the reasonable collection potential (RCP). The RCP is how the IRS measures the taxpayer’s ability to pay.

The RCP includes the value that can be realized from the taxpayer’s assets, such as real property, automobiles, bank accounts, and other property. In addition to property, the RCP also includes anticipated future income less certain amounts allowed for basic living expenses.

Reasons for the Offer

The IRS may accept an OIC based on three grounds:

• First, the IRS can accept a compromise if there’s doubt as to liability. A compromise meets this only when there’s a genuine dispute as to the existence or amount of the correct tax debt under the law.

• Second, the IRS can accept a compromise if there’s doubt that the amount owed is fully collectible. Doubt as to collectibility exists in any case where the taxpayer’s assets and income are less than the full amount of the tax liability.

• Third, the IRS can accept a compromise based on effective tax administration. An offer may be accepted based on effective tax administration when there’s no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.

IRS Forms to Use

When submitting an OIC based on doubt as to collectibility or effective tax administration, taxpayers must use the most current version of Form 656, Offer in Compromise, and also submit Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, and/or Form 433-B (OIC), Collection Information Statement for Businesses.

A taxpayer submitting an OIC based on doubt as to liability must file a Form 656-L.pdf, Offer in Compromise (Doubt as to Liability), instead of Form 656 and Form 433-A (OIC) and/or Form 433-B (OIC). Form 656 and referenced collection information statements are available in the Offer in Compromise Booklet, Form 656-B.pdf.
Application Fee

In general, a taxpayer must submit an application fee for the amount stated on Form 656. Don’t combine this fee with any other tax payments.


However, there are two exceptions to this requirement:

• First, no application fee is required if the OIC is based on doubt as to liability.

• Second, the fee isn’t required if the taxpayer is an individual (not a corporation, partnership, or other entity) who qualifies for the low-income exception. This exception applies if the taxpayer’s total monthly income falls at or below 250 percent of the poverty guidelines published by the Department of Health and Human Services. Section 1 of Form 656 contains the Low Income Certification guidelines to assist taxpayers in determining whether they qualify for the low-income exception.

A taxpayer who claims the low-income exception must complete section 1 of Form 656 and check the certification box.

Payment Options Types

Lump Sum Cash Offer –

Taxpayers may choose to pay the offer amount in a lump sum or in installment payments. A “lump sum cash offer” is defined as an offer payable in 5 or fewer installments within 5 or fewer months after the offer is accepted. If a taxpayer submits a lump sum cash offer, the taxpayer must include with the Form 656 a nonrefundable payment equal to 20 percent of the offer amount.

This payment is required in addition to the application fee. The 20 percent payment is generally nonrefundable, meaning it won’t be returned to the taxpayer even if the offer is rejected or returned to the taxpayer without acceptance.

Instead, the 20 percent payment will be applied to the taxpayer’s tax liability. The taxpayer has a right to specify the particular tax liability to which the IRS will apply the 20 percent payment.


Periodic Payment Offer –

An offer is called a “periodic payment offer” under the tax law if it’s payable in 6 or more monthly installments and within 24 months after the offer is accepted. When submitting a periodic payment offer, the taxpayer must include the first proposed installment payment along with the Form 656.

This payment is required in addition to the application fee. This amount is generally nonrefundable, just like the 20 percent payment required for a lump sum cash offer. Also, while the IRS is evaluating a periodic payment offer, the taxpayer must continue to make the installment payments provided for under the terms of the offer.

These amounts are also nonrefundable. These amounts are applied to the tax liabilities and the taxpayer has a right to specify the particular tax liabilities to which the periodic payments will be applied.

Upon acceptance of an OIC, the taxpayer may no longer designate offer payments to any tax liability specifically covered in the offer agreement.

Suspension of Collection

Ordinarily, the statutory time within which the IRS may engage in collection activities is suspended during the period that the OIC is under consideration, and is further suspended if the OIC is rejected by the IRS and where the taxpayer appeals the rejection to the IRS Office of Appeals within 30 days from the date of the notice of rejection.

Offer Terms

If the IRS accepts the taxpayer’s offer, the IRS expects that the taxpayer will have no further delinquencies and will fully comply with the tax laws. If the taxpayer doesn’t abide by all the terms and conditions of the OIC, the IRS may determine that the OIC is in default.

For doubt as to collectibility and effective tax administration OICs, the terms and conditions include a requirement that the taxpayer timely file all tax returns and timely pay all taxes for 5 years from the date of acceptance of the OIC.

When an OIC is declared to be in default, the agreement is no longer in effect and the IRS may then collect the amounts originally owed (less payments made), plus interest and penalties. Additionally, any refunds due within the calendar year in which the offer is accepted will be applied to the tax debt.

Right to Appeal

If the IRS rejects an OIC, the taxpayer will be notified by mail. The letter will explain the reason that the IRS rejected the offer and will provide detailed instructions on how the taxpayer may appeal the decision to the IRS Office of Appeals.

The appeal must be made within 30 days from the date of the letter.

Return of an Offer

In some cases, an OIC is returned to the taxpayer rather than rejected, because the taxpayer didn’t submit necessary information, filed for bankruptcy, failed to include a required application fee or nonrefundable payment with the offer, hasn’t filed required tax returns, or hasn’t paid current tax liabilities at the time the IRS is considering the offer. A returned offer is different from a rejection because there’s no right to appeal when the IRS returns the offer.

However, once current, the offer may be submitted again.

*Note: OIC applications received on or after March 27, 2017, are now returned without consideration if taxpayers haven’t filed all required tax returns.

The application fee is returned and any required initial payment submitted with the OIC is applied to outstanding tax debt.

This policy doesn’t apply to current year tax returns if there is a valid extension on file.

About Michael Sullivan

Michael Sullivan is Former Award Winning IRS Agent and Teaching Instructor with the Internal Revenue Service. Mr. Sullivan worked in the local, district and regional offices of the IRS. Mr. Sullivan has been in private practice since 1982 and is a tax expert in the field of Federal and State Tax Resolution. Connect with Michael Sullivan on Google+

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