Many Internal Revenue Service tax debts can be negotiated downwards via the Offer-in-Compromise (OIC) procedures. To ignore the IRS is foolish as the IRS has a variety of enforcement tools at its disposal. The IRS has the authority to file a general tax lien. It can also seize wages, bank accounts, vehicles and real estate.

The law that authorizes the OIC was "on the books" when I started with the IRS in 1966. At that time it was not looked upon favorably by management as a viable way for a taxpayer to settle a tax debt. That attitude continued until the early 1990's. The IRS then became more agreeable to using OIC procedure.

Early OIC procedures were cumbersome and time consuming. Very few individuals and not very many tax professionals were successful in getting an OIC accepted. A few years ago, the IRS supposedly simplified the OIC procedure.

As an Offer Specialist with the IRS since 1992, I have looked at hundreds of OICs. And, as simple as they are supposed to be, they are still complicated. It was my experience that, without professional help, very few OICs were accepted.

Without going into a lot of detail, the minimum OIC amount is calculated by adding your equity in assets plus an additional amount based upon your ability to make monthly payments. (Your equity in assets is defined as "Net Realizable Equity" which is eighty percent of the fair market value less the encumbrances).

Up until a very short time ago, if the above total exceeded the tax debt, you could not do an Offer-in-Compromise. However, in very limited situations, an Alternate Basis Offer may work for you. So, even if you can actually pay all of the tax by strict application of the tax laws, you may be able to compromise your debt for less. Not many tax professionals know this. I have advised several taxpayers of this procedure while I was still employed by the IRS and was able to get the OIC accepted.

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