An $89,000 IRS Tax Debt Settled For $100 Through Offer In Compromise

SITUATION:

A taxpayer from New York reached out to us, burdened with an overwhelming IRS debt of $89,000. They were facing significant financial hardship and were unsure how to resolve their tax issues. The looming threat of IRS collection actions, such as wage garnishments and bank levies, added to their stress.

INVESTIGATION PHASE:

Upon taking the case, our team of tax professionals, including an enrolled agent, began a thorough investigation. The first step was to obtain a signed power of attorney, granting us the authority to communicate directly with the IRS on the taxpayer’s behalf. We immediately requested a stay of enforcement to halt any imminent collection actions, such as wage garnishments or bank levies, providing much-needed relief from the constant threat of financial seizure.

Next, we requested the IRS master file, a comprehensive record of the taxpayer’s tax history and liabilities. This document was crucial in understanding the full scope of their tax debt. Upon receipt, our tax team meticulously reviewed the master file and confirmed that the taxpayer owed a total of $89,000. This amount covered multiple tax years and was compounded by penalties and interest.

During our review, we noted that for several of the tax years in question, there were significant discrepancies and possible errors in the filings. For instance, some years showed missing deductions and credits that could have significantly reduced the liability. Specifically, we identified that in one tax year, the IRS had filed a Substitute for Return (SFR) due to non-filing. An SFR typically does not account for all the deductions and credits a taxpayer is entitled to, often resulting in an inflated tax debt.

Given the financial situation and the considerable amount of the debt, our tax professionals assessed eligibility for an Offer in Compromise (OIC). The OIC program is designed to help taxpayers who cannot pay their full tax liability and can demonstrate that paying the amount in full would cause undue financial hardship.

To determine eligibility, we conducted a detailed financial analysis, which included:

• Income Verification: Assessing all sources of income, including wages, investments, and other earnings.
• Expense Evaluation: Reviewing necessary living expenses, such as housing, utilities, food, and transportation.
• Asset Examination: Identifying all assets, including real estate, vehicles, and personal property, and their current market values.
• Liability Assessment: Cataloging all existing debts and financial obligations.

This comprehensive analysis was critical in preparing the OIC application, ensuring that it accurately reflected the taxpayer’s financial inability to pay the full amount. By demonstrating that expenses and liabilities outweighed income and assets, we aimed to present a compelling case to the IRS for reducing the tax debt.

Our tax team also identified potential areas where past tax returns could be amended to correct errors and claim additional deductions and credits. This step was essential to not only provide immediate relief but also to reduce the overall debt before submitting the OIC.

Throughout the investigation phase, we maintained constant communication with the taxpayer, keeping them informed and involved in every step. This transparency ensured that they understood the process and felt supported during this stressful time.

Our meticulous preparation and detailed financial analysis were pivotal in laying the groundwork for a successful OIC submission, aiming to significantly reduce the overwhelming tax burden.

COMPLIANCE PHASE:

We began the compliance phase by gathering detailed financial information, including income, expenses, assets, and liabilities. Our goal was to present the IRS with a comprehensive and accurate picture of the financial situation, demonstrating the taxpayer’s inability to pay the full $89,000 debt.

We prepared and submitted the Offer in Compromise application, proposing that the debt be settled for $100, a figure that realistically reflected the taxpayer’s financial capacity. This involved compiling extensive documentation and ensuring that all required forms and schedules were completed accurately.

RESOLUTION PHASE:

The process was lengthy and required persistent communication with the IRS. Throughout this period, we continued to provide updates and reassurances, managing expectations and ensuring compliance with any IRS requests.

After a rigorous review process, we received the news that the IRS had accepted the Offer in Compromise. The tax debt of $89,000 was officially settled for $100. This outcome brought immense relief, significantly improving the taxpayer’s financial situation and providing a fresh start.

Total Amount Owed: $89,000

Amount Settled: $100

Resolution: Offer In Compromise

Phases Worked: Investigation, Compliance & Resolution

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DISCLAIMER:

This example is an actual example of a client who enrolled in the tax program. Every case is unique and this is not an extension that you will receive the same resolution as they will. Your situation is unique, as are all tax cases. The team has extensive experience, has former IRS employees, special officers, enrolled agents, tax attorneys, and CPAs. Our tax team will work diligently with a flat fee to solve the tax issue you have for the best possible resolution for you. That means doing all possible to ensure you pay the lowest amount of taxes legally required based on your situation, allowable deductions, finances, and other factors.