ITS THE IRS-LETS MAKE A DEAL

EXECUTIVE SUMMARY
IRS (Internal Revenue Service) is a tax collection agency in
US. In 1992 it introduced a compromise deal to help the tax
debtors, by allowing huge offers in tax payments.IRS introduced
this deal to increase revenue that otherwise may not be
collected. But in the end it didnt worked out the way IRS
thought.

Exe
cutive Summary Word Count-55

CASE ANALYSIS
IRS (Internal Revenue Service) was considered as most
feared tax collection agency in US. It was known for its ability to
seize personal assets, freeze funds its unwillingness towards
requests. In 1992 they introduced a program called Offer in
Compromise in which the debtor has to pay only a portion of
the actual amount. IRS settlement was based on what the
debtor owe and what they can actually pay. But there were
some conditions put for the program
Conditions
The debtor has to agree to waive the right to
confidentiality, as the settlement becomes part of public
records.
The taxpayer has to promptly pay taxes for the next five
years. Failing to do so then IRS can void the agreement
and reinstate the entire amount.
In this case there mainly three category of people one is the IRS
itself and the other two are the debtor and regular taxpayer. So
here IRS tries to create a win-win-win situation.
For IRS their main aim is to achieve more revenue by
making the debtors pay at least a portion of taxes. The
idea was to bring revenue which otherwise may never be
collected.
Also IRS had an aim to make awareness about people.
There may be many people who cannot pay due to
various reasons such as divorced couples, failed business,

recovering alcoholics etc. So IRS gave them a chance to

get rid of punishments
In the perceptive of a debtor, they wanted to get rid of the
punishment. So even if they failed to pay one year, IRS
provide them a fair chance of paying it the next year. So it
was also a win situation in debtors mind.
For a regular taxpayer, IRS kept their fund transfers
confidential which made them stick to be regular
taxpayer. So that IRS can keep the regular tax payer from
being changed to a debtor

There were some positives aspects to this new program

Positives
Gave fair chance for the people failing to pay tax one year
by giving another chance and also avoiding punishments
They could collect taxes from those debtors which
otherwise may never be collected.
By giving one offer they were liable to pay tax correctly for
next 5 years.
Some of the negative aspects are
Negatives

In order to qualify for tax reductions, tax payer should be

at rock-bottom.
IRS could collect much less revenue than which is owed.
For every one dollar owed only 16 cents is collected.
There is no fairness in tax collection. For example, a guy
having $1.5 million tax debt might need to pay only $1500
while another guy with $75422 tax debt may need to pay
$20000.

Conclusion

IRS planned to collect more revenue by implementing this

program and creating a win-win-win situation. Though it was
helpful for the debtor, but it couldnt collect as much revenue
as IRS thought

C
ase Analysis Word Count-480