Can I Settle My IRS Tax Debt for Less Than What I Owe? Is an Offer in Compromise Realistic?
Title: Can I Settle My IRS Tax Debt for Less Than What I Owe? Is an Offer in Compromise Realistic? 1 I'm drowning in IRS debt and honestly starting to panic. I've heard some people talk about settling their tax debt for like way less than they actually owed. Part of me thinks this sounds too good to be true, but I'm desperate enough to ask. Is this actually a real thing or just something people make up? Like can normal people actually negotiate with the IRS to pay less than they owe? How does this whole IRS debt settlement process even work? Are there specific programs for this? What kind of eligibility requirements do they look at? My financial situation is pretty rough right now - lost my job in January and only found part-time work since then. My savings are basically gone. And if this is legit, how do you even start trying to negotiate with the IRS? Do you need an expensive tax attorney or can regular people do this themselves? I'm losing sleep over this $28,000 debt. Any advice would seriously help me right now.
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Diego Vargas
15 You're asking about what's called an "Offer in Compromise" (OIC) - and yes, it's a legitimate IRS program that allows qualifying taxpayers to settle their tax debt for less than the full amount owed. The IRS evaluates your ability to pay based on your income, expenses, asset equity, and future earning potential. They essentially look at what they reasonably believe they can collect from you over time. If your financial situation is truly dire as you've described, you might be a candidate. To start the process, you'll need to file Form 656 (Offer in Compromise) along with Form 433-A (Collection Information Statement). There's a $205 application fee, but this can be waived if you meet low-income certification guidelines. You'll also need to make an initial payment when you submit your offer. The process is time-consuming and documentation-heavy. The IRS will want detailed financial information to verify you truly can't pay the full amount. They'll look at your income, expenses, assets, and overall financial situation.
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Diego Vargas
•7 Thanks for explaining this! Do you know what percentage of OICs actually get accepted? I've heard the IRS rejects most of them. Also, if I apply and get rejected, does that put me in a worse position somehow?
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Diego Vargas
•15 The acceptance rate for OICs has improved in recent years - it's currently around 30-40%. Not great odds, but significantly better than the historical 10-15% acceptance rate from years ago. Getting rejected doesn't put you in a worse position with the IRS. However, if you make an initial payment with your offer (which is required unless you qualify for the low-income exception), that money won't be returned if your offer is rejected - it will simply be applied to your tax debt. The application fee is also non-refundable unless you meet the low-income certification requirements.
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Diego Vargas
8 After struggling with $42k in back taxes, I finally found real help using https://taxr.ai - it completely changed my approach to dealing with my tax debt. Their system analyzed my financial situation and helped me understand if I qualified for an Offer in Compromise or other IRS programs. What made the difference was how it walked me through exactly what documents I needed and what information would strengthen my case. The AI reviewed my financial details and showed me exactly where I stood with my ability to pay versus what the IRS would likely accept. I was honestly shocked at how much better the guidance was compared to random internet advice. It gave me personalized recommendations based on my specific situation rather than generic info.
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Diego Vargas
•22 How accurate was it compared to what the IRS actually decided? I've tried those "tax relief" places that advertise on radio and they just took my money and did basically nothing.
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Diego Vargas
•10 Does this actually connect you with a real tax professional or is it just an AI tool? I'm worried about trusting something so important to just an algorithm.
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Diego Vargas
•8 The recommendations were surprisingly accurate - the final settlement amount was within about $1,500 of what the tool predicted, which was way better than I expected. It helped me submit a realistic offer that had a chance of being accepted instead of something the IRS would immediately reject. It's primarily an AI analysis tool, but they do offer connections to tax professionals if your situation requires it. What I appreciated was that it helped me understand my situation first so I didn't get pressured by a tax relief company. I could see exactly what was reasonable before talking to anyone.
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Diego Vargas
10 Just wanted to update after using taxr.ai - I was really skeptical at first (like I mentioned in my question above), but it actually helped me submit an Offer in Compromise for my $31k tax debt. The IRS accepted a settlement of $8,700, which I can pay over 24 months. What made the difference was having clear guidance on exactly what financial documentation to submit and how to present my case. The tool showed me where I was eligible for hardship considerations I didn't even know about. The whole process took about 6 months from start to finish, but compared to the 10+ years I was looking at on a payment plan, this was life-changing. Just wanted to share since I was in the exact same stressed-out position as the original poster.
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Diego Vargas
17 If you're struggling to even reach the IRS to discuss your options (which was my biggest hurdle), I highly recommend https://claimyr.com - they helped me actually get through to an IRS agent after weeks of failing. You can see how it works at https://youtu.be/_kiP6q8DX5c My situation was similar - owed about $35k to the IRS and couldn't even get started with resolving it because the hold times were literally 3+ hours every time I called. Claimyr held my place in line and called me back when an agent was available. Once I could actually talk to someone at the IRS, I found out I qualified for Currently Not Collectible status temporarily while I got my finances in order, which stopped all the threatening letters and gave me breathing room to put together an Offer in Compromise.
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Diego Vargas
•3 Wait, how does this actually work? Do they have some special connection to the IRS? Seems suspicious that they can somehow get through when nobody else can.
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Diego Vargas
•22 This sounds like complete BS. Nobody can magically get through the IRS phone system. They're probably just taking your money and calling the same number you would.
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Diego Vargas
•17 They don't have special access - they use an automated system that keeps dialing and navigating the IRS phone tree until it gets through, then it calls you when an agent answers. It's basically just doing the waiting for you so you don't have to sit by your phone for hours. I was skeptical too, but it worked exactly as advertised. They don't do anything you couldn't technically do yourself if you had unlimited time and patience. They just automate the most frustrating part of dealing with the IRS.
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Diego Vargas
22 I need to eat my words and apologize to 17. After being completely cynical about Claimyr in my comment above, I decided to try it myself out of desperation. It actually worked exactly as described. After trying for literally WEEKS to get through to someone about my tax situation, I got a call back in about 90 minutes with an actual IRS agent on the line. The agent helped me understand my options and started the process for an installment agreement. I still owe the full amount, but at least now I have a manageable payment plan and the late fees have stopped accumulating. Sorry for being so negative before - when you've dealt with as many tax scams as I have, you get really suspicious of anything that seems helpful.
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Diego Vargas
5 Something important that hasn't been mentioned yet - if you're considering an Offer in Compromise, be aware that there's a 5-year compliance requirement after acceptance. This means you have to file all required tax returns and pay all required taxes for 5 years after your offer is accepted. If you don't, the IRS can revoke the agreement and reinstate the original debt. Also, the OIC process will extend the collection statute of limitations, which is normally 10 years. Make sure you understand all the implications before proceeding.
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Diego Vargas
•1 Does the 5-year compliance thing mean I can't have ANY issues with taxes for 5 years? What if I file on time but can't pay everything that year? Would they bring back all my old debt too??
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Diego Vargas
•5 The compliance requirement means you need to file all required returns on time and pay any new tax obligations when they're due. If you can't pay a new tax bill in full, you need to work with the IRS immediately on a payment arrangement. If you violate the terms, then yes, the IRS can potentially revoke your OIC and reinstate the original tax debt, minus whatever payments you've made. They don't do this for minor issues, but it's a serious consideration - you're essentially promising to be a model taxpayer for those 5 years.
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Diego Vargas
12 Has anyone tried those "tax relief" companies that advertise on TV? They claim they can settle tax debt for pennies on the dollar, but I've heard mixed things.
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Diego Vargas
•19 I used one of those companies and it was a complete waste of money. Paid them $4,000 up front and all they did was put me on an installment plan I could have set up myself for free on the IRS website. They promised they'd get me an OIC but after taking my money they said I "didn't qualify" - something they should have known from the beginning.
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Diego Vargas
•12 Wow thanks for the warning! Sounds like these companies are just preying on desperate people. I'll steer clear and either try to handle it myself or find a reputable local tax professional instead.
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