Let me tell you about a client who's tax debt I helped reduce.
He had a roofing business, and owed the IRS $215,828.17. This was in February of 2019.
My client was retirement age and not in good health; he 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.
- time left on the 10-year statute
- net asset value
- net income
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 two other factors.
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. The other factor the IRS considered was his 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.
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.
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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.
If you need help dealing with the IRS, I offer you a free consultation so we can better understand your unique situation.
At your free session we will determine if you even need our help. Sometimes you can handle the issue yourself. Anyway, it is free to request. We provide contactless consultations as well over phone or Zoom.