If you speak with an experienced tax debt resolution professional about their most requested solution by new clients, they will inevitably reply, “The Offer in Compromise.” And if you ask that same person what the most complicated solution to negotiate is, they will also inevitably reply, “The Offer in Compromise.” Thanks to misleading commercials touted by companies dubbed “resolution mills” by the federal and state governments, everybody thinks the Offer in Compromise (OIC) program is a viable way to settle any tax debt owed. That just isn’t the case.

In 2023, out of 30,163 Offer in Compromise requests received by the IRS, a mere 12,711 were approved. This low approval rate displays the extreme difficulty of qualifying for the program. If you manage to qualify, you must be ready to fully disclose and maintain your financial condition from the proposal submission to the final negotiation call.

The IRS (and the states that offer a similar resolution program) will approach your financial condition in a very algebraic manner based upon the equity in all assets owned by the taxpayer, and then net discretionary income multiplied by either a predetermined number of months or the remaining months left to collect on the debt. These figures add up to the amount of money the government will consider accepting. The word “consider” is highlighted here because the government can always state that a settlement “isn’t in the best interests of the government” no matter how much you can prove you qualify for the program.

Remember that it is the job of the person assigned to consider the proposed OIC to make the settlement figure as large as possible. He/she will run title traces to see properties or vehicles registered in the taxpayer’s name(s). A forensic dive will be conducted on all bank, credit card, and utility statements that must be furnished in support of the inability to pay. Insurance policy documents will be reviewed to see if any additional coverage is claimed for jewelry, guns, collections, and art. Allowances will not be given for private school tuition, eating out, dry cleaning (unless it is absolutely necessary to earn your income), or vacations. When I say they will put you under a financial microscope, I am not kidding!

If you can undergo this level of financial scrutiny and prove there is no feasible way to pay back the taxes owed, you will qualify for an Offer in Compromise. Let me share a recent case study with you:

A family law attorney contacted me in May of 2023 about a friend who had a tax debt issue, wanting to know if we could help. After speaking with the referred client, not only did we determine we could identify a solution to the $185,000 he knew he owed to the IRS, but it sounded like we could qualify him for a settlement of the debt through the Offer in Compromise program.

Our first hurdle to overcome was a compliance issue. The client had never paid estimated tax payments and relied on a well-intentioned yet misinformed friend to help him compile his annual tax returns using TurboTax. As the client was self-employed as a realtor yet a member of a professional realty company, the friend did not believe my client could claim standard business expenses as a self-employed professional. This is what led to the sizable tax debts accruing to begin with. After connecting the client with a tax professional to compile an accurate 2022 tax return, for the first time in eight years, the client had a reasonable tax rate realized, and we understood what needed to be done to bring him compliant with his current estimated tax obligations. As soon as our client made an estimated tax payment for 2023, we were off and running.

By September, we had compiled a proposal to the IRS to settle what now amounted to over $190,000 of income taxes owed for $4,570. In February of 2024, an Offer Examiner was finally assigned and proposed a counter settlement of $28,166.20. Upon reviewing the calculations that led to that counteroffer, we gathered more financial documents to combat the determined ability to pay. Back-and-forth phone calls ensued, leading to more exchanges of documentation and calculations. Finally, in May of 2024, we received an agreement from the Offer Examiner to settle the debt that had eked over the $200,000 figure for a settlement of what we initially proposed, $4,570.00.

Though you may hear on a radio ad or a TV commercial that if you hire XYZ tax debt resolution company, they may be able to settle your debt for pennies on the dollar too(!), don’t believe it. Slow down and do your homework. Find a reputable company willing to be a part of your trusted tax professional team, a team that welcomes the opportunity to collaborate with your trusted CPA, accountant, and/or bookkeeper. Ask to speak with the individual who would directly be handling your case to ensure they can answer your basic questions, that you are comfortable talking with them, and ask your trusted tax professional to vet them as well. If they aren’t willing to go through those steps with you prior to you signing a contract, run away from them as fast as you can.

If you have a tax debt issue and believe an Offer in Compromise may be a viable option, contact the Golden Lion Tax Solutions team. With over 24 years of experience focused solely on the successful negotiation of past-due tax issues, we can provide an honest assessment of your situation. If it isn’t an Offer in Compromise, we can point you in the best direction for your unique financial circumstances.

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Trust. Protection. Wisdom.

Your future and your family deserve the right protection. Golden Lion Tax Solutions will be your advisor and confidant throughout the entire journey. We guarantee to offer you or your business best-case solutions for your tax debt. We are by your side every step of the way. Start now and get your life back.

For help with your tax debts, email contactus@goldenliontaxsolutions.com or call 833-LION-TAX (833-546-6829)

Disclaimer: There are requirements that must be satisfied in order to qualify for some of the tax solutions we discuss on our website. Not all of our services will be suitable for every client. Golden Lion Tax Solutions is here to help you find the most appropriate solution to fit your situation.