The IRS issued its “Data Book” for FY 2019. This is an 80-page report on IRS activities for the 12 months ended 9/30/19. The most useful information that I can find in it is in regard to Offers-in-Compromise. Offers are where the IRS accepts less than the full amount owed and writes-off the balance. This is the fabled “pennies on the dollar” that you see on TV ads.
Only 33% of the 54,255 offers were accepted with an average offer amount of $16,177. They unfortunately do not report on the number we would really like to know – the average write-off amount. It would be very interesting to know if the write-offs average north of $200 thousand dollars. Well maybe that is not all that important. Given that the IRS has the best collection tools around, they are not likely to accept an offer unless they thought it was the best deal they could get. The reality is that Offers are not the cake walk that the TV commercials display.
It is no secret as to why 2/3 of the offers are rejected. Either the taxpayer is not in compliance with filing and paying their current year taxes or the offer amount was too low. The IRS uses a formula based on the taxpayer’s equity in assets they own plus their future projected cash flow. Failing to do this calculation in advance of filing the offer means the taxpayer is shooting in the dark.
