By Eric Pemper, Founder, CuraDebt.
When a client walks in owing the IRS more than they can pay, the conversation usually starts with a question they heard on the radio: “Can I settle for pennies on the dollar?” Sometimes the honest answer is yes. More often, the better path is a payment plan or a temporary pause in collection. The practitioner’s job is to steer the client to the option that fits their numbers, not the one in the advertisement.
After 25 years working with people and small business owners in debt, I have found that the choice gets much clearer when you look at three things together: what the IRS could realistically collect, how long the collection window has left to run, and what else the client owes.
Start with what the IRS could actually collect
An offer in compromise is built around reasonable collection potential: the equity in the client’s assets plus what the IRS calculates it could collect from future disposable income. If a client’s offer is below that figure, it will almost certainly be rejected, no matter how sympathetic the story.
That makes the financial statement the real starting point. Before discussing any resolution, gather the full picture: income, allowable expenses under IRS collection standards, retirement accounts, home equity, vehicles and business assets. Clients routinely underestimate how much equity counts against them, and overestimate how much hardship helps.
A quick rule of thumb many practitioners use: if the client has meaningful equity or steady income above allowable expenses, an offer is probably not the right first move.
When an installment agreement is the better path
For most clients who can pay over time, an installment agreement is simpler, faster and more predictable than an offer. Streamlined agreements can often be set up online without a full financial disclosure when the balance falls under the IRS thresholds, and they stop most enforced collection while payments are current.
The trade-off is cost. Penalties and interest keep accruing, so the client pays more in total. It helps to show clients that number up front, and to confirm the monthly payment fits their real budget. A payment plan that defaults six months later often leaves the client worse off than before.
When currently not collectible makes sense
Some clients genuinely cannot pay anything right now: a job loss, a medical crisis, a business that just closed. For them, currently not collectible status can stop levies and give breathing room.
Clients should understand what it does not do. The debt does not go away, interest and penalties continue, refunds may be applied to the balance, and the IRS may file a lien. The account is also reviewed if income improves. CNC works best as a bridge, not a destination.
Do not ignore the collection statute
The IRS generally has 10 years from assessment to collect. When a large balance is close to the end of that window, the math changes. A client with seven or eight years already elapsed may be better served by a modest payment plan or CNC than by an offer, which can extend the collection period while it is pending.
Pulling account transcripts to confirm assessment dates should be part of every case review. It is one of the most commonly skipped steps, and one of the most valuable.
Look at the client’s other debt
Tax debt rarely arrives alone. A client who owes the IRS often also carries credit card balances, personal loans or business debt they guaranteed personally. In a study of 12,829 people who asked our company for debt help in 2026, the median person reported $25,000 in unsecured debt, and nearly 1 in 5 owed $50,000 or more.
This matters for the tax plan. An installment agreement that looks affordable on paper can fail if the client is also juggling minimum payments on several cards. Helping the client get the rest of their debt under control, through a hardship plan, consolidation or settlement, can be what makes the IRS agreement sustainable. The order matters too: IRS debt can lead to levies and liens in ways most unsecured creditors cannot, so it usually deserves priority.
Questions to ask before recommending a path
– What is the client’s reasonable collection potential, honestly calculated?
– How many years remain on each assessment’s collection window?
– Can the client afford the proposed monthly payment alongside their other obligations?
– Is the hardship temporary or permanent?
– Are there unfiled returns? Most resolutions require full compliance first.
– What other debts are competing for the same household or business cash flow?
The bottom line
An offer in compromise is the right tool for a smaller group of clients than most people think. For many others, an installment agreement or a period of currently not collectible status, combined with a plan for their other debts, gets them to a better result with less risk. The best outcomes come from starting with the numbers and the calendar, not the headline promise.
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Eric Pemper founded CuraDebt in 2001 and has spent 25 years in the debt relief industry, working with individuals and small business owners on consumer, tax and business debt. Learn how tax debt relief options compare and see debt relief options for clients carrying credit card and other unsecured debt.
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