How Much Money will the IRS Settle for in an Offer in Compromise?

How much will your IRS settlement be when filing an Offer in Compromise? Great question? The IRS tax relief team at Flat Fee Tax Service, Inc. will provide you with some answers and information regarding the Offer in Compromise Fresh Start Initiative.

The average amount the IRS settles for in an offer in compromise is $6,629. Sounds good, doesn’t it?

If only it was that easy – everyone would be doing it, right?

The reality is that in 2014, the IRS received 68,000 offers in compromise from taxpayers. In 2016 the amount of Offer in Compromise submissions was closer to 80,000.

The IRS accepted 27,000 of those 2014 settlement offers. That's approximately 39% of the Offer in Compromise submissions. Per 2016 IRS statistics, the IRS accepted about 42% of all Offer in Compromise submissions.

FLAT FEE TAX SERVICE, INC. (OUR TAX RELIEF TEAM) HAS A 95% IRS SETTLEMENT RECORD OF SUCCESS.

Offer in Compromise Success

Out the 58% of the Offer in Compromise rejections can be attributed to several factors. Many of these rejections are by people who were not eligible and qualified for an IRS settlement. Many taxpayers use the Offer in Compromise process as a "stalling tactic" as the IRS must stop enforcement action while the Offer in Compromise is being evaluated. The remainder is mostly taxpayers who decided to do their own IRS settlement. 

IF YOU REALLY WANT TO SETTLE WITH THE IRS, INVEST A LITTLE BIT OF MONEY AND HIRE AN 
IRS TAX ATTORNEY. 

1-800-589-3078

DOING SO WILL SAVE YOU A TON OF MONEY.

Offer in Compromise Fees:  


In 2014 the total amount of accepted Offer in Compromise settlements was $179 million.

If you are keeping score, that’s an average settlement of $6,629. Everyone is different. Many taxpayers pay only $100 to $500 total.

The IRS uses a very specific financial formula in determining the settlement value of your Offer in Compromise and whether to accept or reject it. Your success depends on how you fit into the IRS formula. That's where your IRS Tax Attorney comes in. 

The IRS offer in compromise formula is complicated and works like this:

First, the IRS will figure out how much they think you can pay them every month in an installment agreement. They do this by asking for your paystubs or, if you are self-employed, a recent profit and loss statement from your business.

Next, the IRS wants to know about your monthly living expenses. Some of those expenses such as your housing and utilities, car payment and food and clothing – are subject to IRS limitations. The IRS also allows for medical insurance, child support, alimony and secured loans.

The IRS calls these limitations Collection Financial Standards, sometimes also referred to as allowable living expenses. The effect is often to create more cash flow than you actually have by limiting your expenses to amounts the IRS thinks are reasonable.

IRS Offer in Compromise

Your income, less your allowable living expenses, equals your monthly cash flow. The IRS is going to put a value on your cash flow for purposes of determining your OIC settlement value.

If you can pay the IRS the settlement within five months after acceptance, the IRS values your monthly cash flow by multiplying it by a factor of 12. So $200 of monthly cash flow equates to a settlement valuation of $2,400.

If you cannot pay your IRS settlement off within five months, the IRS will grant you 24 months payment terms. However, your monthly cash flow – $200/month in our example – would be multiplied by a factor of 24, increasing the valuation to $4,800. in other words, the IRS gives you a discount for paying them the Offer in Compromise settlement sooner rather than later.

After determining the Offer in Compromise settlement value of your cash flow, the IRS will then turn to a valuation of your assets, and add that to the value of your cash flow. What are "your belongings" worth? Your car, house, retirement plan? Subtract any loans to arrive at equity, and in most cases, reduce that by 20% to get to your IRS valuation.

Add your cash flow (multiplied by a factor of 12 or 24) to your asset value, and you have your proposed IRS settlement amount.

IS YOUR HEAD SWIMMING YET?

That formula yields an average of $6,629 to the IRS. It could result in more or less for you, depending on how your finances fit into the IRS formula.

THIS IS WHAT YOU CAN EXPECT FROM THE 
IRS TAX RELIEF TEAM AT 
FLAT FEE TAX SERVICE, INC.


But keep in mind that the IRS disagrees with taxpayers’ valuations and calculations 60% of the time and rejects those offers. The reason for that is a regular "John Doe" taxpayer doesn't do IRS settlements for a living. They do not know the IRS Tax Code.

Success with an Offer in Compromise is based on a full understanding of the IRS investigative process into your income, living expenses and assets. It is not a one size fits all situation; the amount of one person’s settlement has no bearing on the success of another’s. The IRS does not have a set percentage of settlement to the amount owed. It all depends on convincing the IRS that your financial situation is dismal and that the IRS will never get paid after applying their internal guidelines.

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