You owe the IRS $100,000 They'll take $5,000 and close your file. Permanently. Balance goes to $0 It's called an Offer in Compromise. Form 656. The IRS approved 42% of them last year. Application fee: $205 Here's the exact formula they use to decide your number and how to reverse-engineer the lowest possible offer The IRS doesn't want to chase you for 10 years. Liens require court filings. Levies require processing. Garnishments require administration. They'd rather take your $5,000 check today than spend a decade trying to squeeze $100,000 out of someone who will never have it They literally built a math formula to calculate the minimum they'll accept. Here it is: RCP = (monthly disposable income x remaining collection months) + (net realizable equity in assets) Monthly disposable income: your gross monthly income minus IRS-allowed living expenses. They don't use YOUR actual expenses. They use standardized tables published on the IRS website. These tables set exact allowances by county for housing, food, transportation, healthcare, and out-of-pocket expenses If you earn $4,200/month and the IRS allowable expense table for your county totals $3,900, your disposable income is $300/month. If you earn $3,800/month and the table allows $3,900, your disposable income is negative and the IRS considers it $0 Remaining collection months: for a lump sum offer (paid in 5 months or less), multiply disposable income by 12. For a periodic payment offer (paid over 6-24 months), multiply by 24. A lump sum offer will always be cheaper than a payment plan offer. Always choose lump sum if you can Net realizable equity in assets: bank accounts, investments, vehicles, real property. BUT they subtract allowances. Household furnishings: exempt. Retirement accounts: heavily discounted, because the IRS applies a "quick sale value" and knows cashing them out triggers penalties and taxes Real calculation: Income: $4,200/month IRS allowed expenses: $3,900/month Disposable income: $300/month Lump sum multiplier: 12 months $300 x 12 = $3,600 Assets: Bank account: $2,100 Car equity: $4,800 (below the IRS allowance, counts as $0) Household goods: exempt RCP: $3,600 + $2,100 = $5,700 Your offer: $5,700 on $100,000 in tax debt. 5.7 cents on the dollar The nuclear part: While the offer is being reviewed (6-24 months), collection activity legally stops. No levies. No wage garnishment. This is in IRC Section 6331(k)(1) And if the IRS fails to make a determination within 24 months of receiving your application, your offer is AUTOMATICALLY ACCEPTED. Two years of silence = you win by default. IRC Section 7122(f) The forms you need: Form 433-A (OIC): complete financial disclosure. Every bank account, every asset, every income source, every expense. Fill it out accurately because they cross-reference it against bank and DMV records. Lying on this form is a federal crime Form 656: the actual offer. Your amount, your payment terms, your signature $205 application fee (waived if your income is low enough. the form has the table) Initial payment with the application: 20% of your offer for lump sum. On a $5,700 offer that's $1,140 One client owed $213,000 across 4 tax years. Hadn't filed two of them. Getting intent to levy notices every month. We filed the missing returns first (required before you can submit), then calculated her number at $8,400 IRS accepted 9 months later. $213,000 settled for $8,400. 3.9 cents on the dollar Then we fixed her credit. Then we stacked $120K in 0% business funding. She opened a cleaning company 4 months later. The same IRS that was garnishing her wages now cashes her quarterly tax payments from a profitable business the math is public. the formula is published. the form costs $205. the difference between paying $100K and paying $5K is knowing it exists lol