The IRS Does Not Care About Excuses — But They Do Care About Math

What if you could tell the IRS that you simply don’t want to pay your full tax bill—and they actually agreed? Use that question at a dinner party and you will get laughed out of the room. But in the world of tax resolution, there is a mechanism designed for that exact scenario. It is called an Offer in Compromise (OIC), and for a small business owner drowning in payroll tax penalties or back taxes, it feels less like a government program and more like a lifeline. 

Most business owners stay awake at night with questions they are too afraid to ask their accountant, let alone a federal agent. Let us pull back the curtain and answer the questions that are likely keeping you from taking action.

Does the IRS just accept pennies on the dollar because I am a good person?

In a word: No. The IRS is not a charity. They accept an Offer in Compromise based on a formula called Reasonable Collection Potential (RCP). Essentially, if you can prove that you truly cannot pay the full debt before the clock runs out on their ability to collect it, they would rather take a smaller sure thing today than nothing later. It's a business decision for them, not a favor to you.

Will they make me close my shop to pay the debt?

This is the fear that paralyzes most entrepreneurs. The goal of an OIC is actually to help you keep your head above water. When we calculate your offer, we look at your assets and your future income. The IRS generally isn't looking to put a productive business out of commission; they are looking for the maximum they can reasonably expect to collect while allowing you to stay in tax compliance moving forward.

Can I stay in the OIC program if I miss a future tax payment?

This is the hidden trap. An Offer in Compromise comes with a 'five-year probationary period.' If the IRS settles with you and you fail to file your returns on time or fail to pay your current taxes at any point in the next five years, they can revoke the settlement. They will take the money you already paid, add back the debt they forgave, and hit you with updated interest and penalties. To settle, you must commit to being a 'model taxpayer' for the foreseeable future.

Is there really a special 'Fresh Start' secret that only some people know?

You might hear commercials late at night promising a 'Fresh Start' program as if it is a secret club. Here is the truth: The Fresh Start initiative was a series of changes made years ago to the Internal Revenue Manual. There is no secret portal. The 'secret' is simply knowing how to navigate the complex math of the RCP formula and documenting your expenses correctly so the IRS doesn't overstate what you can afford to pay.

You do not have to guess at these answers. If the weight of back taxes is preventing you from growing your business, it is time for a confidential conversation. We can help you determine if you are a candidate for an Offer in Compromise and guide you through the process of making the IRS an offer they can't refuse.

Download our free guide to turn IRS anxiety into a clear plan, regain your peace of mind, and finally get a good night's sleep.

Featured in the International Business Times, Marcelino Dodge, EA, CTRC shares how he helps taxpayers break free from IRS stress and rebuild financial confidence — read the full story now.

Learn more on the Tax Answers Advisor podcast.

Cash Tracks Financial of Colorado Springs

Marcelino Dodge, EA, CTRC

525 N Cascade Ave., Suite 200

Colorado Springs, CO 80903

(719) 359-8789

www.cashtracksfinancial.com

success@cashtracksfinancial.com