Offer in Compromise versus Partial Payment Installment Agreements for back IRS taxes-personal and business taxes

Today I was able to negotiate a partial payment installment agreement for a couple that owes over $140,000 in back civil penalty taxes (a trust fund taxed assessed against them for an old corporation which owed back payroll taxes) for $252 a month over the next four years (the time remaining on the collection statue).  The couple makes decent money, over $7200 per month which makes this a pretty decent deal for my clients.

Although this is not considered technically an Offer in Compromise, it does allow the taxpayer to "settle" for paying approximately $12,000 on over $140,000 of tax debt, a whopping savings of over 91.5% of the total tax debt (when you consider IRS interest which is compounded daily on the civil penalty taxes-personal income tax debt also accrues penalties, but the trust fund recovery penalty in itself is a penalty so only interests accrues on the account).

Now if my client comes up with around $12,000 or even a little less (by borrowing from friends or relatives for example) we could in the future still submit a formal Offer in Compromise which would mean the IRS would be paid much sooner and the debt would be removed from their record (and thus the tax liens would be released).   Of course the taxpayer would still need to make the $252 installment agreement payment while the Offer in Compromise is being worked (a process which could last several months).

In any event, the worst case scenario due to the expiring collection statute (10 years from when the tax is assessed), in this case my clients will end up paying approximately $12,000 on over a $140,000 tax debt, or 8.5% of the total tax liability.  Not too shabby.

If you need help with back taxes give me a call at 720.491.3531 or email nick@patriotresolution.com and remember stay away from ambulance chasers calling you due to a notice of federal or state tax lien filing!