Let me tell you about a client who's tax debt I finally reduced in February of 2019. He had a roofing business, and owed the IRS $215,828.17. He was retirement age and not in good health. My client had substantial equity in his home and fairly good income.
When you file an offer-in-compromise with the IRS, they look at three main factors.
The first thing the IRS looks at is how much time is left on the 10 year collection statute. If there are several years left, the IRS prefers to try to collect what it can instead of accepting less. And if I recall, he had five or six years left, so we had to convince the IRS on the other two factors.
The second one was his net asset value. The IRS typically requires the offer be for, at least, the taxpayer's net asset value. He had substantial equity in his home.
Lastly, the IRS considers net income. He had fairly good income and the IRS usually requires 12 months of net income to be offered. Since my client had substantial net asset value and fairly good income, we tried something else. We relied on exceptional circumstances to overcome net asset value and his net income. The IRS will consider the taxpayer's exceptional circumstances to accept a lower offer when justified.
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We were able to convince the IRS that even though he had the ability to fully pay his tax debt(around $215,000), we successfully negotiated and reduced the debt to $93,029. I could have pushed harder and maybe lowered his tax debt even more, but my client felt responsible to pay his fair share of taxes.
We reduced his taxes by over 43 percent!
When all was said and done, we reduced his taxes by $122,799.17, which is just over 43% of the total! It took about six or eight months to complete these negotiations.
My client did still pay a substantial amount of money, but he was very happy because he offered what was right in his own mind. He paid a large amount of money, but it saved him over $120,000 because of his poor health and his retirement age, which qualified him for exceptional circumstances.