If you live on Long Island or anywhere in New York, you don’t need anyone to tell you that the cost of living is high. By the time you cover your mortgage or rent, property taxes, utilities, commuting costs, childcare, and groceries, there’s often very little left.
Add IRS or New York State tax debt on top of that, and the situation can go from stressful to overwhelming quickly.
That’s usually the moment people type one desperate question into Google:
“Can I actually settle my tax debt for less than I owe?”
The short answer is yes, it is possible.
The longer answer is: it only works if your situation fits the IRS’s very specific rules — and those rules aren’t always explained clearly in TV or radio ads.
Fine & Clear Tax Solutions, based in Uniondale and serving taxpayers across New York and the U.S., spends a lot of time untangling the myths from the reality. Let’s walk through what “settling for less” really means, how it works, and whether it might apply to you.
What People Think “Settling for Less” Means vs. What It Really Is
Most of the big promises you hear are referring to a single IRS program: the Offer in Compromise (OIC).
The marketing version sounds like this:
“Pay pennies on the dollar. Slash your tax bill. Wipe your slate clean.”
The IRS version is different:
“Prove that, based on your income, assets, and reasonable living expenses, we cannot collect the full amount before the statute expires — and we may accept a smaller amount instead.”
There’s no back-room haggling. No “let’s meet in the middle.” The IRS relies on a formula called Reasonable Collection Potential (RCP) to decide what you can realistically pay.
If RCP is less than what you owe, you may be a candidate for settlement.
If RCP is more, they’ll expect payment in full or through another program.
Understanding that formula is where experienced tax pros earn their keep.
How the IRS Actually Calculates Whether You Can Settle
Think of the IRS as asking two questions:
- How much could we collect from your future income, after normal living expenses?
- How much could we get from your assets if we really pushed it?
Add those together, and you have your Reasonable Collection Potential.
Income and Expenses: The Monthly Picture
The IRS looks at:
- Wages or salary
- Self-employment income
- Bonuses, commissions, side gigs
- Pension or Social Security
- Rental income (if any)
Then they subtract what they consider “allowable expenses.” This is where Long Island reality often clashes with IRS standards:
- Housing and utilities
- Food and household supplies
- Car payments and transportation
- Health insurance and out-of-pocket medical
- Childcare and dependent care
- Certain taxes and mandatory deductions
If your actual expenses are higher than IRS tables, you’re not automatically disqualified — but you do need to prove why your numbers are reasonable for where you live.
In Nassau County and around New York City, that proof is often very compelling.
Assets: The Equity Picture
The IRS also examines:
- Equity in your home or co-op
- Equity in vehicles
- Retirement accounts
- Savings and investments
- Business equipment or tools
- Cash value life insurance
They usually discount some of that equity, but not all. Sometimes a taxpayer looks “wealthy” on paper because of home equity but has very little actual cash flow.
A good OIC package explains that gap clearly.
Why Long Island and New York Taxpayers Often Have a Strong Case
Living and working in New York comes with financial pressures the IRS’s national tables don’t fully capture:
- High housing costs – Mortgage and rent numbers in Uniondale, Hempstead, Garden City, and beyond often dwarf national averages.
- Property taxes – New York property taxes are not small; they impact monthly reality in a big way.
- Commuting costs – LIRR passes, tolls, gas, parking — it all adds up.
- Childcare and school-related expenses – Many families pay as much as a second rent for childcare.
- Supporting family – It’s common to be helping elderly parents or adult children in the same household.
When Fine & Clear builds a settlement case, these factors aren’t just background noise — they’re part of the financial story that explains why full payment isn’t realistic.
Who Is Most Likely to Qualify for an Offer in Compromise?
Every situation is unique, but here are some profiles that often line up well with settlement:
- People whose income dropped sharply after a layoff, medical issue, or business slowdown.
- Retirees who now live on fixed income but still carry old tax debt.
- Divorced taxpayers suddenly supporting a household alone.
- Self-employed or 1099 workers who had a big year, didn’t set aside enough for taxes, and haven’t had comparable income since.
- Individuals with significant medical expenses or long-term health challenges.
The common thread: the tax debt was based on a picture of your finances that no longer exists — and isn’t likely to return.
When Settling Isn’t the Best Option
Sometimes the math simply doesn’t support an OIC, even if life feels tight. In those cases, a different strategy can be smarter, cheaper, and less stressful.
Alternatives may include:
- Payment plans (Installment Agreements) – Spreading the balance out in a way that works with your budget.
- Partial-pay Installment Agreements – Paying what you can each month, knowing the debt may expire before it’s fully paid.
- Penalty abatement – Reducing the balance by removing certain penalties.
- Currently Not Collectible (CNC) – Pausing active collection because you genuinely cannot pay without hardship.
- Appeals – If the IRS calculated something incorrectly or didn’t follow procedure.
One of the first things Fine & Clear does in a consult is answer a simple but important question:
“Is an Offer in Compromise the right tool here, or is there a better path?”
What a Strong Settlement Package Looks Like
A well-prepared OIC isn’t just a form and a number. It’s a documented, supported explanation of your financial life.
Expect to gather:
- Pay stubs
- Bank statements
- Mortgage or lease documents
- Utility bills
- Insurance premiums
- Medical bills
- Childcare invoices
- Retirement account statements
- Proof of any special circumstances (illness, disability, etc.)
Fine & Clear’s job is to translate this stack of paperwork into a clear narrative the IRS can follow. The goal is simple:
Show, in the IRS’s own language and numbers, that full payment isn’t possible — but a fair settlement is.
Why Having Local New York Pros on Your Side Matters
Fine & Clear Tax Solutions is led by Guy and Annamaria Finocchiaro, both CPAs, serving clients from their Uniondale office and virtually across the country.
Because they live and work on Long Island, they understand:
- How different New York costs look from national charts
- How both IRS and New York State tax authorities operate
- How to position a case so it’s realistic, credible, and compelling
They’re not just filling out forms — they’re advocating for a settlement number that actually reflects your life in New York.
The Bottom Line
Yes, you can sometimes settle IRS tax debt for less than you owe. But it’s not automatic, and it’s not magic.
It comes down to:
- Honest numbers
- Careful analysis
- Thorough documentation
- Strategic presentation
If you’re carrying tax debt and wondering whether an Offer in Compromise might apply to you, talking to a team that understands both the IRS and New York’s realities is one of the smartest first steps you can take.
Fine & Clear can review your situation, run the numbers the same way the IRS does, and tell you — before anything is filed — whether settlement is worth pursuing or whether another strategy will get you to the finish line faster.