Offer in Compromise programs let qualifying taxpayers settle tax debts for less than full amounts owed. The IRS accepts offers when the amount offered represents the most they can reasonably collect considering your income, expenses, asset equity, and ability to pay. Acceptance rates hover around 40%, with most rejections due to applicants having sufficient assets or income to pay through installment agreements.

Qualification requires demonstrating legitimate doubt about collectability or amount owed. Submit detailed financial information documenting income, expenses, assets, and liabilities. The IRS calculates reasonable collection potential—what they could collect through levies and installments over time. Offers exceeding this amount get serious consideration, while lowball offers face automatic rejection.

Offer in Compromise eligibility:

• Current on all required tax return filings
• Made all required estimated payments for current year
• Not in open bankruptcy proceedings
• Financial situation shows inability to pay full debt
• Offer amount equals or exceeds reasonable collection potential
• Application fee and initial payment required with submission

Currently Not Collectible status temporarily suspends collection when financial hardship prevents any payment. The IRS verifies that paying would prevent meeting basic living expenses. While collection stops, interest and penalties continue accruing, and tax liens may remain filed.

Unaddressed tax debt triggers increasingly serious consequences. The IRS files tax liens publicly recording debts and damaging credit scores while making selling or refinancing property extremely difficult. Liens attach to all current and future property including real estate, vehicles, and business assets. They remain until debts are paid or statute of limitations expires.

Tax levies allow the IRS to seize assets directly including bank accounts, wages, retirement accounts, and property. Wage garnishments can take substantial portions of paychecks, leaving barely enough for basic living expenses. The IRS can also seize and sell vehicles, real estate, or business assets to satisfy debts. These actions occur after multiple notices, but ignoring problems accelerates enforcement.

Consequences of unaddressed debt:

• Tax liens damaging credit and complicating property transactions
• Wage garnishments reducing take-home pay substantially
• Bank account levies seizing funds without warning
• Property seizures and forced sales
• Passport revocation for seriously delinquent debts exceeding $59,000
• Penalties and interest continuing to accrue daily

Addressing tax debt promptly, even if full payment isn't possible, prevents escalation. The IRS prefers working with taxpayers showing good faith efforts over pursuing aggressive collections requiring significant resources while yielding uncertain results.

Many taxpayers successfully resolve IRS debts independently using online tools and direct communication. The IRS website provides payment agreement applications, financial disclosure forms, and comprehensive guidance. For straightforward situations like missed payments or small balances, DIY approaches save professional fees while achieving satisfactory results. However, complex situations benefit from professional expertise.

Tax professionals including CPAs, enrolled agents, and tax attorneys understand IRS procedures and negotiate effectively. They identify resolution options you might miss and prepare applications maximizing approval chances. Enrolled agents specialize in tax resolution, often costing less than attorneys while providing equivalent representation for most situations. Tax attorneys become necessary when criminal issues, significant litigation, or complex legal matters arise.

When professional help makes sense:

• Tax debts exceeding $25,000 requiring complex negotiations
• Business tax issues or payroll tax problems
• Multiple unfiled returns needing preparation and submission
• IRS audits or appeals requiring representation
• Offers in Compromise applications involving detailed financial analysis
• Criminal tax issues requiring legal defense

Beware of tax relief scams promising to eliminate debts for pennies or guarantee Offer in Compromise acceptance. Legitimate professionals explain realistic options, provide written fee agreements, and never guarantee specific outcomes. Check credentials through state licensing boards and verify enrollment with the IRS. Avoid companies demanding large upfront fees before providing services or making unrealistic promises about eliminating debts quickly.