11 Oct How much money will the IRS accept instead of full payment?
In times of desperation, it is important to get good counsel and not make rash decisions. This is especially true when dealing with cascading federal income tax debt. As dark as it may seem, there is hope and there are solutions that the IRS offers to help mitigate the consequences of an unpaid tax bill. When it is not financially feasible for a taxpayer to pay their full tax bill, the Offer In Compromise program provides a path to settle for less than the balance, under certain circumstances. Although tedious and detailed to apply for, the IRS prefers to work out arrangements rather than pursue collections, which means the worst thing a taxpayer can do is to ignore the problem.
The amount the IRS will accept instead of paying your full tax liability varies with each person because it is based on assets, monthly income, and monthly expenses. The offer amount is the result of applying a formula that includes a taxpayer’s total monthly income less certain monthly expenses for several years, plus the value or equity portion of certain assets. In some cases, settlement amounts can be as low as a few hundred dollars.
Getting help from a tax professional is always a good idea when facing financial hardship and an impending tax bill. Every situation is unique and requires different tactics in negotiating with a government tax agency.