I have talked before about the pitfalls of trying to settle your IRS debt for pennies on the dollar, otherwise called Offers in Compromise. I have shown how only 2% of those who apply actually get approved. I have shown that if you have any way at all that you can make payments, you will be denied an offer.
Now I would like to share some stories about Offers in Compromise. All of these tales are from the time after I left the IRS and began using my skills to help the average tax debtor. Even when Offers in Compromise are accepted, the situation that allowed it to be accepted was a result of the person losing everything. Here are the first true tales of Offers in Compromise.
The Shocking Case of the Misfiled Payroll Taxes: A husband and wife who owned an electrical repair company were clients who came to me for help to get an Offer in Compromise. They had owned their business for several years, and the business did fairly well. As with most small businesses, however, they didn't change their lifestyle to take into account their quarterly payroll taxes that needed to be paid. The IRS came on the scene to assess a $100,000 lien against them. Because they hadn't kept up with the quarterly taxes, they lost their business, their home, their car, their boat, and all the other comforts they had earned from a lifetime of working.
They were both in their mid-50's, and starting over wasn't a likely option. After the IRS took them out, the husband became a used car salesman and the wife is now a part-time clerk at a law firm. Because they lost everything and had no assets of any worth, I was able to get their tax debt of $100,000 settled for $8,000. But you have to remember, the only reason they got that Offer was because they had lost everything.
The Case of No Mercy for the Fat Cat: I once spoke to a man who owed over $200,000 in back taxes. This guy was well off. He owned a home and had a $9,000 per month mortgage. He had two kids, both in private school. He asked for my help in getting him an Offer in Compromise. I did an income and lifestyle estimate and informed the client that the IRS would not consider him for an offer. I informed him that his mortgage and private school expenses were not considered "basic expenses." Neither were his credit card payments.
The private school and credit card payments are understandable as "not basic," but why not the mortgage? The national average for housing and utilities is $1700 per month. The client had a mortgage of $9,000 per month, well above the average. The only way he could have qualified would be to take his kids out of private school and sell his house. And, if he sold the house, the IRS would expect the money from that sale. He still wouldn't have qualified because his annual salary also prevented him from qualifying.
Brace yourselves for more Tales of the IRS-Hitman!
For more information on the Offer in Compromise, read my earlier entry "Settle Your IRS Tax Debt for Pennies on the Dollar".
Labels: Offer in Compromise