TAX NEWS - 2010

Irs Tax Settlement

IRS settlement?

Will the IRS settle owed taxes? I owe the IRS about 19k. I have seen comercials that allow people to settle pennies on the dollar. Is this possible? I posted earlier. Basically, I worked in a war zone and some things went down were I had to leave. I did not make 330 and cannot claim residence. I owe about 19k, but only have 6 since I was 1099 and could not claim unemployment, and had to live off my savings.


Thanks for the help

An Offer in Compromise is a settlement with IRS where you pay less than 100 cents for every dollar you owe and IRS forgives the rest. It will do this if it determines you are offering as much or more as it could collect from you through monthly payments or seizing your property.

The amount you have to pay is, to use the IRS jargon, is "an amount that represents the reasonable collection potential of the account." This is a lump sum equal to what you could get from the equity in all your assets if they were sold at a quick sale, generally 80% plus 48 times what you could pay monthly on an installment agreement.

For example, if you had a car worth $10,000 and owed $5,000 on it and nothing else and IRS said you could make payments to IRS of $100 per month you would have to offer 80% of $10,000 minus the $5,000 owed = $3,000 PLUS 48 times $100 = $4,800 for a total of $7,800 on whatever you actually owed. You could make up to 24 monthly payments but would have to increase the 48 monthly payments to 60 for a total offer amount of $9,000 at $375 per month. How someone who could only pay $100 per month could be expected to pay $375 is a mystery.

I am an enrolled agent, licensed by the US Treasury Department who specializes in taxpayers who have large unpaid tax bills and prepare these for clients. You do not have to have a representative but the process can be pretty intimidating if you haven't had any experience. That decision is up to you.

I got an offer for a client who owed a quarter million dollar liability accepted at 1 cent on the dollar. Many other clients have not qualified. The average nationwide for accepted offers is about 17 cents on the dollar. Your own affairs may be more complicated, and it probably are if you add a home and a 401(k) plan and a car that will be paid off in just a few years, you would have to go through these gyrations with every asset. Your case might also dictate an entirely different approach including getting the whole account put on ice for a few years or filing for bankruptcy.

If you want to hire a professional representative – enrolled agent, CPA or attorney – stay away from the ones that advertise on cable TV. Their fees can be heart stopping. Mine are a good deal less than half of what the "As Seen on TV" firms charge. If you want additional information outside this forum, you can email me through my profile.