My father-in-law recently died, leaving his widow with a peck of problems. We have been able to get most of them resolved by compromises with the creditors. We even got his auto dealer to accept the return of the car as full satisfaction of the remaining loan. Their home was the only thing in joint names. What hit us hardest is the debt for income taxes of $102,000. No one knew he was in such trouble. Every time a letter arrived from the IRS, he told his wife that it was just a routine request for information, and that he would take care of it. She never knew that the taxes were not paid. We still have about $15,000 worth of personal assets in his name. We are trying to settle this debt with the IRS by filing an Offer in Compromise (Form 656). My mother-in-law is retired on Social Security and interest from one bank account. How much should we offer the IRS? Would they reject any offer and force her to sell her house?
What Harry says: IRS has tightened up the approval process for Offers In Compromise, so it's a bit harder to predict what the outcome will be. Since she was never really aware of what was going on, I don't think you will be rejected if you offer the full value of the remaining assets other than the home. However, I think that reserving an emergency fund for your mother-in-law also would be OK. Try an offer of half the available funds. At this critical economic time, I believe such an offer will be accepted. In addition, I suspect that IRS has placed a lien on the home. If this is the case, be sure to get it removed once the offer is accepted.