Does the IRS Really Settle for Less?

Does the IRS Really Settle for Less

You have actually most likely seen the commercials on television: A pitchman claims that you can resolve your tax expense for “pennies on the dollar.” All you need to do is work with the law firm in the business and also they will certainly use their special negotiating skills as well as inside knowledge to get you off the hook with the Internal Revenue Service (IRS). Is this true? Does the IRS Really Settle for Less?

In the real world, however, it’s not so very easy to get the IRS to work out a tax financial obligation for pennies on the dollar. It does take place, however only in cases where a taxpayer clearly does not have the assets and/or income to pay off the tax obligation financial obligation in a reasonable time. If you have the cash to pay the IRS– or will likely have it in the future – no quantity of negotiating will certainly encourage the IRS to settle for less than you owe. This is so whether you represent yourself or hire an expensive law firm.

Does the IRS Really Settle for Less?

Does the IRS Really Settle for Less

What these commercials are talking about is obtaining the IRS to approve an Offer in Compromise. An Offer in Compromise – “OIC” – is an agreement between a taxpayer and the internal revenue service that works out the taxpayer’s tax responsibilities for less than the total owed. The IRS will certainly approve your OIC just if you convince it that:

  • You aren’t able to pay the full amount in a reasonable time, either as a round figure or over time with a settlement arrangement
  • There is a question as to the amount of your tax obligation (unusual), or
  • Because of exceptional circumstances, a settlement completely would certainly create a “financial difficulty” or be “unjust” or “inequitable”– for instance, you can not work due to health issue, or you’d be entrusted no money to pay your basic living expenses if you marketed your assets to pay your tax bill completely.


To make this resolution, the internal revenue service looks at your revenue and also properties to determine your “reasonable collection capacity (RCP).” You need to offer detailed information concerning your financial circumstance on IRS Form 433-A (individuals) or Type 433-B (businesses), Collection Information Declaration. This consists of proven info about your cash, financial investments, readily available debt, properties, revenue, and also financial debt. Along with property, the RCP likewise includes your anticipated future earnings, much fewer amounts allowed for basic living costs. You can make use of the Offer in Compromise Pre-Qualifier on the IRS website to determine whether you are eligible and prepare an initial proposal.

You will certainly need to find up a minimum offer amount as part of your OIC. This is the minimum. quantity the internal revenue service will accept as well as is based on the monetary disclosures you make in your Kind 433. Basically, your offer has to equate to the net realizable value of your possessions plus your excess regular monthly earnings after subtracting your month-to-month costs. You then increase this number by 12 or 24, depending upon which payment period you pick (either five months or more years). You can comply with the directions in Type 433 for determining your minimum offer.

Before you submit your deal, you have to

  1. File all income tax returns you are legitimately required to submit,
  2. Make all needed estimated tax obligation settlements for the current year, and also
  3. Make all needed government tax deposits for the present quarter if you are a company owner with employees. If you or your organization is presently in an open personal bankruptcy proceeding, you are not eligible to get an offer. Your debts need to be fixed in your bankruptcy proceeding– that’s what personal bankruptcy is for.


The OIC Pamphlet, Form 656-B (PDF) has step-by-step directions for preparing and also sending all the necessary kinds for an OIC. You don’t have to employ a law practice or other tax obligation expert to make an OIC. If your offer is rejected, you can appeal within 30 days using Request for Appeal of Rejected Offer in Compromise.

Further Reading

  • How Much Should I Offer in Compromise to the IRS?

    If you cannot pay your tax debt, you can try to settle with the IRS for less than what you owe. If successful, a partial payment arrangement or offer in compromise may be an option. An offer in compromise is a settlement agreement between a taxpayer and the IRS that allows taxpayers with financial hardship to resolve their tax debts for less than the full amount owed. The Offer In Compromise program becomes an option when other collection efforts have proven unsuccessful and allow you to settle your tax debt for less than what you owe. Here are some questions and answers about OICs…

  • How Much Will the IRS Usually Settle for? A Closer Look at Offers in Compromise

    How Much Will the IRS Usually Settle for? Each year, the Internal Revenue Service (IRS) approves countless Offers in Compromise with taxpayers regarding their past-due tax payments. Basically, the IRS decreases the tax obligation debt owed by a taxpayer in exchange for a lump-sum settlement. The average Offer in Compromise the IRS approved in 2020 was $16,176. How do we get to that amount? In 2020, the IRS accepted 17,890 Offers in Compromise with a total worth of $289.4 million (resource). Divide $289.4 million by 17,890, and – presto! – you get an average deal in compromise of $16,176. Naturally, that number is meaningless…

  • Does the IRS Really Settle for Less?

    You have actually most likely seen the commercials on television: A pitchman claims that you can resolve your tax expense for “pennies on the dollar.” All you need to do is work with the law firm in the business and also they will certainly use their special negotiating skills as well as inside knowledge to get you off the hook with the Internal Revenue Service (IRS). Is this true? Does the IRS Really Settle for Less? In the real world, however, it’s not so very easy to get the IRS to work out a tax financial obligation for pennies on the dollar. It does take place…

How to Stop an IRS Wage Garnishment or Levy

HOW TO STOP AN IRS WAGE GARNISHMENT OR LEVY

How to Stop an IRS Wage Garnishment: 5 Options

When you have tax debt, it’s possible that the IRS can garnish part of your income in what is referred to as a “continuous levy.” If you fail to reply to their request for repayment, the IRS will notify your employer, and a large portion of your income will automatically be charged toward your tax debt balance. They can take a quarter or more of your monthly income, which can imply hefty financial strain. The good news is, there are several choices for just how to quit IRS wage garnishment. Decide which alternative is best for you so you can stop IRS wage garnishment as well as reduce the worry associated with the financial burden.

Read More

6 Sure-fire Ways to Avoid an IRS Tax Audit

6 Ways to Avoid an IRS Tax Audit

The IRS could be identified as one of the most powerful organizations in the United States. The IRS is exclusively responsible for collecting government taxes, applying federal tax regulations, and imposing penalties for late, incorrect, or deceptive filings. As a result, the IRS poses one of the largest economic dangers to many, many people and business owners. For this reason, knowing how to avoid an IRS tax audit can be highly instrumental.

To sum it up, the IRS has distinct informative sources, legal standing, and a role as a law enforcement agency. In addition to that, the IRS additionally acts as a legislative-originating authority with a huge quantity of liberty to make mistakes without consequences (no person can penalize the IRS for inaccurate tax accusations).

So what can we do to minimize the IRS’s over-inflated buildup of power and protect ourselves from its possibility for financial wrath? While every tax circumstance and scenario is unique, there are specific practices a taxpayer can execute to minimize the probability of facing a tax audit or another enforcement activity.

In this post, we provide 6 sure-fire ways to avoid an IRS tax audit. If you follow these 6 rules of thumb, you will make sure to stay out from under the scrutiny of the IRS. And, if by some chance you still become attract an IRS tax audit, you will be more likely to defend your

Do you have 5k+ in Tax Debt with the IRS or California (or any other state, for that matter)?

My Tax Settlement Logo - How to avoid an IRS tax audit
Request a Free Consultation With Us Today

Here are the 6 sure-fire ways to avoid an IRS tax audit

  1. Take Preventative Measures by Working with an Accountant
  2. Maintain accurate tax records
  3. Aim to be Transparent & Don’t Tax Dodge
  4. Don’t Miss Filing Deadlines
  5. Use Only Verifiable Numbers
  6. Seek Guidance at the First Sign of Audit

Let’s dig further into each of the 6 and get a clear picture of what each means.

6 sure-fire ways to avoid an IRS tax audit

1. Take Preventative Measure by Working with an Accountant

There are two things we want to mention before digging into this topic.

  1. Tax filing tools and software, like TurboTax and TaxAct, are smart and adaptable, but lack the oversight and strategic direction of an accountant or CPA, which is especially helpful for those who have complex finances.
  2. Although these softwares try to be as clear as possible, they cannot prevent YOU from altogether misunderstanding a question or making a mistake that could come back to bite you.

An accounting professional can surely assist you to become organized. He or she can advise you on the best way to keep documents. An accountant can help you prepare profit-and-loss statements to make sure that you can see just how much money you are making and where your finances is going, and also help prepare for just how much tax you might owe. He or she can advise you regarding what is (or is not) deductible for tax purposes, along with the very best means to validate and also increase your genuine deductible expenditures.

Most notably, an accountant can keep you in tax filing compliance. Think it or not, one of the most usual reasons that individuals attract internal revenue service scrutiny is since they fell short to satisfy routine filing requirements.

2. Maintain Accurate Tax Records

Keeping effective records is one of the most important parts of your duties as a taxpayer. Usually, you have to keep records and supporting records for at the very least 3 years after you file a return. These records record what you will assert on your income tax return, including:

  • all your sources of income,
  • the overall of any type of withholding and estimated tax payments you make,
  • the expenditures you may be qualified to deduct.Your good recordkeeping also helps you figure out which important credits and deductions you get and offers paperwork if we ask you for added details.

At the start of each tax year, prior to you asserting a credit or itemized deduction, review these lists to make sure you’re keeping the documents you need to obtain the credits deductions you deserve. Each list includes in-depth details about the proof you need if you need to send additional details after you file. 

3. Don’t Tax Dodge & Aim to Be Transparent

Usually, tax evasion situations on legal-source income begin with an audit of the filed tax return. In the audit, the Internal Revenue Service discovers errors that the taxpayer intentionally and willingly submitted. The error amounts are normally huge and also happen for several years – showing a pattern of intentional evasion.

Here’s more concerning what the IRS looks out for:

Unreported earnings

This is the most significant problem that brings taxpayers under criminal investigation. This consists of overlooking particular deals, like the sale of an organization, or whole income sources, such as income from a side business. This concern has obtained lots of gig economy workers in trouble with the IRS, when they neglect income from their side hustle.

Dodgy behavior throughout an audit

Individuals who make incorrect statements or intentionally hide records (such as checking accounts) from an internal revenue service auditor are headed for criminal prosecution. The IRS these behaviors “badges of Fraud.” They’re red alerts that suggest tax evasion.

4. Don’t Miss Filing Deadlines

When you miss a tax deadline and owe to the IRS, you should file your tax return ASAP. Every day your tax return is late, the IRS typically charges interest, failure to file penalties, and failure to pay penalties until you file your return and pay the due balance.

January 15, 20224th-quarter 2021 estimated tax payment due
If you’re self-employed or have other fourth-quarter income that requires you to pay quarterly estimated taxes, get them postmarked by January 15, 2022.
April 15, 20221st-quarter 2022 estimated tax payment due
If you’re self-employed or have other income that requires you to pay quarterly estimated taxes, get your Form 1040-ES postmarked by this date.
 April 18, 2022Individual tax returns due for tax year 2021
The due date for filing tax returns and making tax payments is April 18, 2022.  If you haven’t applied for an extension, e-file or postmark your individual tax returns by midnight. The Individual Tax Return Extension Form for Tax Year 2021 is also due on this day.
Last day to make a 2021 IRA contribution
If you haven’t already funded your retirement account for 2021, do so by April 18, 2022. That’s the deadline for a contribution to a traditional IRA, deductible or not, and a Roth IRA. However, if you have a Keogh, SEP, or other eligible plan and you get a filing extension to October 15, 2022, you can wait until then to put 2021 money into those accounts.
June 15, 20222nd-quarter 2022 estimated tax payment due
If you’re self-employed or have other income that requires you to pay quarterly estimated taxes, make sure your payment is postmarked by this date.
September 15, 20223rd-quarter 2022 estimated tax payment due
If you’re self-employed or have other income that requires you to pay quarterly estimated taxes, make sure your third-quarter payment is postmarked by September 15, 2022.
October 15, 2022Extended individual tax returns due
If you got a filing extension on your 2021 tax return, you need to complete it and e-file or have it postmarked by October 15, 2022.
January 15, 20234th-quarter 2022 estimated tax payment due
If you’re self-employed or have other income that requires you to pay quarterly estimated taxes, get them postmarked by January 15, 2023.
Credit for Table: turbotax

5. Only Use Verifiable Numbers – Avoid an IRS Audit by Avoiding Estimations

Don’t use estimated numbers on your taxes. If your numbers are repeated, too “round,” or look conspicuous for other reasons, that peaks interest from the IRS.

Think about what each number may look like to people who are paid to detect fraud. Round numbers may look like multiple expenses lumped together, which may make it easier for you, but the real question the IRS would have is: are these actually deductible?

Only use verifiable numbers – meaning numbers for expenses for which you have a paper trail for – to not arch a brow over at the IRS.

6. Seek Guidance at the First Sign of Audit

Don’t wait until you receive a notice of wage garnishment before you act!

Audits can be very easy to take care of in a lot of scenarios.  If the IRS asks you to send them additional information or to pay additional tax on unreported income, you may only need to send the information to support your tax return. An example would be to send the EIN of the child care provider to get the child care credit.

However, if you do not agree with some of the issues the IRS brings up, seek help. As I said at the beginning of the article, the IRS can and does make mistakes with little to no oversight.

We would be happy to help you review any letters or audit notices from the IRS to parse out their meaning. Just go to mytaxsettelement.com, and click the Get An Appointment button in the right-hand corner. It is our catchall form that will go directly to a tax debt professional will to give advice and act on your behalf.

However, the part that gets people into trouble is when they don’t take action, or they lack the understanding that action is needed. If you get a letter from the IRS, you should call a CPA or an IRS tax audit representative to help you sort out what’s going on.

There you have it – 6 Sure-fire Ways to Avoid an IRS Tax Audit!