Case Study: Real Estate Agent Settles $64,000 Tax Debt for $3,000

We were able to help our clients triumph over a $64,000 IRS tax debt.  The tax debt was settled for $3,000 through the Offer In Compromise program.  The settlement amount was based on our clients' monthly discretionary income and balance in a business bank account.
 
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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.

Background

Our clients, a husband and wife, had income tax liability for several tax years between 2005 and 2015 as well as shared responsibility liability penalties totaling $65,000. The source of the income tax liability was failure to pay estimated tax payments on self-employment income and penalties for not having health insurance under the Affordable Care Act (Obamacare).  They have three children that are claimed as dependents.

Income

Our clients had gross earnings from business income of $13,800 per month.  After business expenses, our clients' net monthly income average $6,000 per month.  

Assets

Our clients had minimal liquid assets. They owned two vehicles, but had no equity in them. They had personal bank accounts, but the total balance did not exceed the $1,000 allowance provided by the IRS.  A business bank account factored into the amount that needed to be offered to the IRS to satisfy the statutory requirements. 

Complicating Factors

The primary complicating factor was that our client was self-employed as a real estate agent.  Real estate agents earn commissions only when their client buys or sells a property.  As a result their income changes drastically from month to month.  This is a challenge when providing evidence of monthly income for Offer In Compromise purposes as well as maintaining current tax deposit compliance through estimated tax payments.

Outcome

After submitting the Offer to the IRS’s Brookhaven Campus our clients’ case was assigned to a local offer examiner out of the Santa Ana IRS Officer. The offer examiner requested an updated profit and loss statements, substantiation of business expenses, and bank statements.
 
After a review of the provided documents, the IRS agreed to accept $3,000 in exchange for discharging $64,000 in tax debt. The end result was a savings of $61,000 (95 percent discount) and an immediate release of the tax liens that had been filed.