When people make an "offer in compromise" deal with the IRS, to pay off a large delinquent tax debt with a lump sum, for less than the full amount, what percentage of the full amount is usually settled on?
When people make an "offer in compromise" deal with the IRS, to pay off a large delinquent tax debt with a lump sum, for less than the full amount, what percentage of the full amount is usually settled on?Depends on the financial statement you submit, current income, current living expense and liquid assets they can grab. They even take life insurance cash values as well as jewelry. There is no such thing as “average”. If so, the average American would have one breast and one testicle.If you look at tax court, most professionals refer to it as the “Candy Store” Let’s make a deal is the coin of the realm. If you have even a shred of evidence or some District Court case, you are going to tear them up. 30% is what I shoot for and it is the usual settlement or I go to court. If 90% did not settle, the courts would be backed up for 7 years. They have to “make a deal”. That goes also to Offer and Compromise. The last settlement I did was $110,000 (including penalties and interest) and settled for $10,000. I could have retired if I had laid down odds that “withholding tax” could be negotiated. I wasn’t even sure but rolled the dice. The government’s position was the withholding was the workers money and not the employer. The Employer was nothing more than a fiduciary collecting the money for the government. Bankruptcy was not an option but it was a service business and if the government didn’t deal, the business would have been shut down and no chance of receiving a dime. Over One Hundred people would have been laid off (a cleaning business) and the bulk would have been on welfare, unemployment, food stamps etc. The Judge order us into the Jury room and said “either come up with a deal or I will give you a deal that neither one of you will like.After what seemed like “all day”, the finally caved in for Ten grand and I lent the money to the client to with the expressed and implied condition if the IRS did not issue a full settlement, the loan was off. Everything went smooth, and the company is still operating today and a profit. That is less than ten cents on the dollar.I also heard of a Doctor selling everything he had in contemplation of retirement. he sold his home, business property and his practice. Well over a million Dollars. His tax bill was also well over a Hundred Thousand. He simply didn’t pay them. A Revenue Officer was assigned and of course, his file was moved into Collection. They could find no assets. Everything was moved out of the country. They threatened him with fraud, He said good luck with that one. he called them from the Airport and told them he was leaving the country. He offered them Ten Grand to settle or go pound sand and good luck. After about six months, his Offer and Compromise showing zero assets (confirmed by Collection) and they settled.When it comes down to collecting money, the IRS is very good at. One of the guys I have breakfast with each day is a retired Revenue Agent from the Collections Department. We used to be bitter enemies and hated each other. Turns out he is pretty damned sharp and that Is probably why I hated him so much. Now, I realize he is really right up there as the best of the best. He also has a Master’s Degree and one of the best accountants I have seen. The point is, you can settle, but you had better be broke to do so. If it can’t be paid off in less than five years, you can pretty much forget it.