Navigating an Offer In Compromise after owing $200K in unpaid 1099 taxes

An Offer In Compromise (OIC) is definitely an option worth exploring in your situation. It's a program that lets taxpayers settle their tax debt for less than the full amount if paying the full amount would create financial hardship. The IRS looks at your ability to pay, income, expenses, and asset equity to determine eligibility. First step is to make sure you've filed all required tax returns - the IRS won't consider an OIC if you're missing any filings. Then you'll need to complete Form 433-A (individuals) or 433-B (businesses) financial statement and Form 656 (Offer in Compromise). There's also a $205 application fee, though it can be waived if you meet low-income certification guidelines. Be prepared to provide extensive documentation of your financial situation - bank statements, pay stubs, investment records, loan statements, and a list of all assets with their current value.

After fighting with the IRS for 8 months over a similar situation (though not as much money), I finally found taxr.ai (https://taxr.ai) and it literally saved me thousands. Their AI analyzes your specific tax situation and financial documents, then helps you decide if an OIC is the right move and how to properly document everything. The reason I recommend them is because they showed me exactly what the IRS would be looking for in my financial documentation - which expenses they'd allow, which assets they'd value differently than I expected, and how to properly complete all the forms. It caught several mistakes I was making that would have tanked my offer.

I need to eat my words about taxr.ai being a scam. After my skeptical comment, I decided to check it out myself since I've been dealing with some back taxes (not as much as OP but still significant). I'm honestly impressed with their approach - it's not the typical tax relief company model at all. Their system analyzed my financial documents and gave me a realistic assessment of my Offer In Compromise chances, showing exactly where I'd likely run into issues with the IRS. Turns out I had been calculating my reasonable collection potential all wrong. The best part was seeing exactly how the IRS would view my assets and income - way different than what I thought! Definitely not a magical solution, but it gave me clarity about whether an OIC made sense or if I should pursue a payment plan instead. Saved me from wasting months on an offer that wouldn't have been accepted.

If you're struggling to get through to the IRS about your Offer In Compromise (which is pretty common), I highly recommend Claimyr (https://claimyr.com). I was trying to get updates on my OIC application for WEEKS with no luck - constant busy signals or disconnections after waiting on hold forever. Claimyr basically holds your place in the IRS phone queue and calls you back when an actual agent is on the line. You can see how it works in their demo video: https://youtu.be/_kiP6q8DX5c. It saved me literal days of time that I would have spent on hold. The reason this matters with an OIC is that you often need to communicate with the IRS several times during the process - to clarify financial details, provide additional documents, check status, etc. Being able to actually reach a human makes a massive difference.

I need to publicly admit I was totally wrong about Claimyr. After dismissing it as a scam, I was still desperate to talk to someone at the IRS about my payment plan, so I reluctantly tried it. Within about 2 hours (which is lightning fast for the IRS), I got a call back and was connected directly to an IRS agent! No hours of waiting on hold, no getting disconnected after 45 minutes. The agent helped me resolve a discrepancy with my account that had been causing major headaches. For anyone dealing with complex tax issues like an Offer In Compromise, being able to actually speak with IRS representatives when you need clarification is invaluable. I've probably spent 15+ hours on hold with the IRS this year alone before discovering this service. Definitely using it for all my future IRS calls.

I went through the Offer In Compromise process last year for about $85k in tax debt. Just want to share some practical advice: 1. Be EXTREMELY thorough with your financial documentation. Any missing statements or unexplained deposits will delay everything. 2. The IRS will value your assets higher than you think - they'll look at retirement accounts, cars, property, everything. 3. They scrutinize your expenses closely - if you claim high food or housing costs, be ready to justify them. 4. The process took almost 11 months for me. Patience is essential. 5. I ended up settling for about $27k, which was roughly 32% of what I owed. Not pennies on the dollar, but still a huge relief. Remember that while you're waiting for a decision, penalties and interest continue to accrue if your offer is rejected, so consider making payments if possible.

Quick question for anyone who's gone through an Offer In Compromise - what happens to tax liens during this process? I have similar issues to OP and the IRS put a lien on my house last year. Would starting the OIC process affect that at all?

If you're considering an Offer In Compromise, you should also look into currently not collectible status as a temporary measure. If your financial situation shows you can't pay your living expenses AND make tax payments, the IRS might put your account in CNC status. Collection activities stop, though interest and penalties continue to accrue. This could buy you time to improve your financial situation or prepare a stronger OIC application. The IRS periodically reviews CNC accounts (usually every 1-2 years) to see if your situation has improved.