If you try to settle your back tax debt with the IRS, you should expect that your minimum Offer is going to be the value of your house multiplied by 80% minus your mortgage. For example, a $200,000 house with a $150,000 mortgage would be valued at $30,000 for your offer (200k x 80% minus 150k = 30k). However, as the following story will explain, the IRS will waive the equity in the house in an Offer, if you can show financial hardship, and settle your debt for much less.
In a case our staff got accepted this week, our client had a house worth $140,000 and a $40,000 note against it. In spite of the $72,000 of equity, her Offer was accepted for $1600.00. Wow. In this situation, the IRS didn't see that the equity was accessible due to her minimal income and exhaustive expenses.
It's also important to point out that the house was her "home." The IRS will not forego equity in a rental property or investment property. In addition, to allowing for less home equity, the IRS recently made some of their most radical changes to the Offer Program.
