Case Study: An $85,400 IRS Debt Settled for $16,200
May 20, 2018 7:49:07 PM by Adam Brewer
We were able to settle an $85,400 IRS tax debt for $16,200 through the Offer In Compromise program. The settlement amount was based on monthly discretionary income and retirement assets.
Obligatory Disclaimer: Every tax case is different. The following case study is presented because we are proud of the result and it serves as an example of what is possible through an Offer In Compromise. There are a lot of misconceptions about resolving tax debt. If you have tax debt contact us for a free evaluation of your tax case.
Our clients, a husband and wife, had income tax liability for tax years 2008 through 2014 totaling $85,400. The source of the income tax liability was failure to pay estimated tax payments on self-employment income and insufficient withholding on wages.
Our clients earned a combined $6,000 per month. One spouse was self-employed and the other was a wage earner, but they contributed evenly to household income.
Our clients had minimal liquid assets. They owned two vehicles, but had no equity in them. They had bank accounts, but the total balance did not exceed the $1,000 allowance provided by the IRS. A retirement account factored into the amount that needed to be offered to the IRS to satisfy the statutory requirements. Husband owned "tools of the trade" which were exempt when calculating asset values.
The primary complicating factor was that our clients resided in the home of a family member. While they contributed to household expenses the amount they paid for rent and utilities was far less than would be paid if they had rented a home or apartment on their own. Since Taxpayers saved money by living with a family member they appeared to the IRS to be better positioned to repay their tax debt.
After submitting the Offer to the IRS's Brookhaven Campus our Clients' case was assigned to a local offer examiner. The offer examiner requested updated financial information regarding the self employment income and proposed adjustments based on monthly vehicle payments that exceeded IRS standards.
After negotiating other items, the IRS agreed to accept $16,200 in exchange for discharging $85,400 in tax debt. The end result was a savings of $69,200 (82 percent discount) and an immediate release of the tax liens that had been filed.