I'm filing an Offer In Compromise...what percentage is a reasonable offer?

Answer 1

OIC Terms

Effective for all offers starting July 16, 2006, there are three payment terms taxpayers and the IRS may agree to:

Lump Sum Cash Offer - paid in five or fewer installments, upon written notice of acceptance. Taxpayers submit a payment of 20 percent of the total offer amount with the Form 656. Exception: if the taxpayer meets low-income exception or is filing a “doubt as to liability” offer only.
Short Term Periodic Payment Offer - paid within 24 months from the date IRS receives the offer. Taxpayers submit the first payment with the Form 656. The taxpayer continues to make scheduled payments during the offer investigation. If the taxpayer fails to make the scheduled payments, IRS will treat the offer as a withdrawal and return it to the taxpayer.
Deferred Periodic Payment Offer - paid over the remaining life of the collection statute. Taxpayers submit the first payment with the Form 656 and continue to make scheduled payments during the offer investigation. If the taxpayer fails to make the scheduled payments, the IRS will consider the offer withdrawn and return it to the taxpayer.
Note: The Worksheet to Calculate an Offer Amount and the Form 433-A worksheet instructs wage earners and self-employed individuals on how to figure the appropriate offer amount depending on the type of offer chosen by the taxpayer. For additional information, refer to the section on Offer in Compromise Payment Plan.
http://www.irs.gov/businesses/small/article/0,,id=109628,00.html

Answer 2

If the IRS were to foreclose on you, and put up everything you owned up for auction, then garnished your wages for 5 years, that's the baseline the IRS uses to determine if your OIC is reasonable or not.

Answer 3

The IRS doesn't look at percentages.

They look at your assets and your future earning power.

Keeping in mind, the IRS only says "Yes" only about 15% of the time. What people can really afford and what they think that they can afford are apparently two different things.

Answer 4

Rob & Wayne are both right.