This is called “Offer in Compromise”. It can be considered by the IRS if you are financially unable to pay your full debt. That calculation is made under specific guidelines. It is also sometimes called “Fresh Start.” (It does not usually work for payroll tax issues or trust fund penalties.)
In rare cases, an offer may be considered if there is a doubt as to whether the tax debt is actually owed. (This is not the usual situation and is not described here.)
These “pennies on the dollar” cannot be considered if IRS calculations show that you can pay the full debt under the rules. This kind of offer usually takes many months to settle. Depending on the situation, there may be a large or very small reduction in the debt. You will be required to prove your qualification and then to complete the payment arrangement exactly as required. Failure to make a required payment on time or failure to file and pay future tax returns on time can blow the whole deal.
The first calculation we make is to review your situation in order to determine if there is a real chance that you might qualify to make such an offer to the IRS.
If it is clear that a “pennies on the dollar” offer can’t be considered, we then look for other arrangements that may be available. In a few cases it may be possible that you cannot make current payments to clear the back taxes. If you qualify, the account can go temporarily into “currently uncollectible” status. That does not clear the tax or stop penalties and interest from accruing.
Call us to discuss your specific situation. We can help!