Owe $10,000 or more to the IRS or state tax authorities? Our licensed CPAs, Enrolled Agents, and Tax Attorneys step in within 24 hours to halt aggressive collections, waive penalties, and negotiate an official IRS Fresh Start Offer in Compromise (IRC § 7122) settlement.
IRS Reasonable Collection Potential (RCP) & Fresh Start Resolution Comparison ($35,000 Tax Debt)
Under Internal Revenue Manual (IRM) 5.8.4, the IRS evaluates Offer in Compromise (Form 656) eligibility using your Reasonable Collection Potential: RCP = Net Realizable Equity in Assets (80% quick-sale value minus loans) + (Monthly Disposable Income after IRS National & Local Standards x 12 or 24 months):
| Financial Metric | High-Cost Status Quo | With Settle My Tax |
|---|---|---|
| Unresolved IRS Automated Collection (ACS) | CP504 / LT11 Notice + Continuous Wage Levy | ✓ Form 2848 POA Stay + Collection Hold |
| 72-Month Streamlined IA (IRC § 6159) | 0.5%/mo Failure-to-Pay Penalty + 8% Interest | ✓ $486 / mo Fixed (Penalty Rate Cut by 50%) |
| First-Time Penalty Abatement (IRM 20.1.1.3) | Up to 25% Failure-to-File + 25% Failure-to-Pay | ✓ 100% Administrative Waiver of Eligible Penalties |
| Offer in Compromise (Form 656 / 433-A OIC) | $35,000 Full Balance + Compounding Interest | ✓ Settled for Calculated RCP (If RCP < $35,000) |
10-State Consumer & Commercial Protection Matrix
Review the governing state regulatory authorities, statutory protections, and exemptions across the 10 largest US jurisdictions:
| State | Regulatory Authority | Governing Act | Statute | Protection Standard |
|---|---|---|---|---|
| NY | New York State Department of Financial Services (NY DFS) | NY Consumer Credit Fairness Act (CPLR § 214-i 3-Year Limitation) & 23 NYCRR Part 600 | 3 Yrs | 90% of gross wages exempt; no garnishment if disposable income < 30x NY minimum wage (CPLR § 5231) |
| CA | California Dept. of Financial Protection and Innovation (DFPI) | Rosenthal Fair Debt Collection Practices Act (Cal. Civ. Code § 1788) & SB 1235 Commercial Disclosure | 4 Yrs | 80% of disposable earnings exempt up to 40x California/local minimum wage (CCP § 706.050) |
| TX | Texas Office of Consumer Credit Commissioner (OCCC) | Texas Debt Collection Act (Tex. Fin. Code Chapter 392) & Tex. Civ. Prac. & Rem. Code § 16.004 | 4 Yrs | 100% constitutional wage garnishment prohibition for consumer credit card/loan debt (Tex. Const. Art. 16 § 28) |
| FL | Florida Office of Financial Regulation (OFR) | Florida Consumer Collection Practices Act (FCCPA, Fla. Stat. § 559.55) & § 95.11(2)(b) | 5 Yrs | 100% head-of-family wage garnishment exemption up to $750/wk unless waived in writing (Fla. Stat. § 222.11) |
| IL | Illinois Dept. of Financial and Professional Regulation (IDFPR) | Illinois Collection Agency Act (225 ILCS 425/) & 735 ILCS 5/13-205 | 5 Yrs | 85% of gross earnings or 45x Illinois state minimum wage exempt from wage deduction |
| PA | Pennsylvania Department of Banking and Securities | Pennsylvania Fair Credit Extension Uniformity Act (FCEUA, 73 P.S. § 2270.1) & 42 Pa.C.S. § 5525 | 4 Yrs | 100% wage garnishment exemption for general unsecured consumer debt (42 Pa.C.S. § 8127) |
| OH | Ohio Department of Commerce — Division of Financial Institutions | Ohio Consumer Sales Practices Act (ORC Chapter 1345) & ORC § 2305.06 | 6 Yrs | 75% of disposable earnings or 30x federal minimum wage exempt |
| GA | Georgia Department of Banking and Finance | Georgia Fair Business Practices Act (O.C.G.A. § 10-1-390) & O.C.G.A. § 9-3-24 | 6 Yrs | 75% of disposable earnings or 30x federal minimum wage exempt |
| NC | North Carolina Office of the Commissioner of Banks | North Carolina Debt Collection Act (N.C.G.S. § 75-50) & N.C.G.S. § 1-52 | 3 Yrs | 100% wage garnishment exemption for general unsecured consumer credit card debt (N.C.G.S. § 1-362) |
| VA | Virginia Bureau of Financial Institutions (SCC) | Virginia Consumer Protection Act & Va. Code § 8.01-246 (5-Year Written Contract Limitation) | 5 Yrs | 75% of disposable earnings or 40x Virginia state minimum wage exempt (Va. Code § 34-29) |
Frequently Asked Questions
Under IRC § 7122 and IRM 5.8.4, the IRS does not settle for an arbitrary percentage; it calculates your Reasonable Collection Potential (RCP) on Form 433-A (OIC). RCP equals your Net Realizable Equity in assets (typically 80% of fair market value minus secured loan balances) plus 12 months (for a 5-month Lump Sum Cash Offer) or 24 months (for a 24-month Periodic Payment Offer) of your Monthly Disposable Income after deducting IRS Collection Financial Standards for housing, utilities, food, transportation, and healthcare.
Notice CP504 is a Notice of Intent to Seize (Levy) your state tax refund or other property, whereas Notice LT11 (or Letter 1058) is the formal Final Notice of Intent to Levy and Notice of Your Right to a Hearing under IRC § 6330. Receiving an LT11 or Letter 1058 triggers a strict 30-calendar-day window to file IRS Form 12153 (Request for a Collection Due Process or Equivalent Hearing), which legally suspends IRS levy action while Appeals reviews your resolution proposal.
Once you sign IRS Form 2848 (Power of Attorney and Declaration of Representative), a licensed Enrolled Agent, CPA, or Tax Attorney can contact the IRS Practitioner Priority Service (PPS) or Automated Collection System (ACS), submit a verified financial statement (Form 433-F), and establish a qualifying Installment Agreement or Currently Not Collectible (CNC Status 53) hardship determination to secure a manual levy release (Form 668-D) within 24 to 48 hours.
Under expanded IRS Fresh Start guidelines (IRM 5.14.5.2), individual taxpayers owing $50,000 or less in combined tax, penalties, and interest can qualify for a Streamlined Installment Agreement up to 72 months (or up to the 10-year Collection Statute Expiration Date) without submitting a full Form 433-A financial statement, and without a Notice of Federal Tax Lien (NFTL) filing if enrolled in Direct Debit.
Under IRM 20.1.1.3.3.2.1, the IRS grants an administrative waiver of Failure-to-File (IRC § 6651(a)(1)), Failure-to-Pay (IRC § 6651(a)(2)), and Failure-to-Deposit (IRC § 6656) penalties for a single tax period if (1) you had no penalties assessed in the 3 prior tax years, (2) all required tax returns are filed, and (3) you have paid or arranged to pay any tax currently due.
Under IRC § 6502, the IRS generally has 10 years from the date a tax liability is formally assessed (the 23C assessment date on your IRS Account Transcript) to collect the tax by levy or court proceeding. Once the CSED expires, the remaining tax balance is legally extinguished, though certain actions (such as filing an Offer in Compromise or Collection Due Process appeal) toll (pause) the CSED clock while pending.
Explore More From Settle My Tax
- IRS Fresh Start Initiative & Offer in Compromise (Form 656 / RCP Formula) Complete Guide
- IRS Notice CP504 & LT11 Final Notice of Intent to Levy: 30-Day CDP Hearing & Levy Release
- IRS Form 656 & Form 433-A (OIC) Reasonable Collection Potential (RCP) Mathematical Guide
- IRS Streamlined Installment Agreement vs. Offer in Compromise (IRC § 7122) Comparison
- IRS Notice Decoder: How to Respond to CP14, CP501, CP503, CP504, and LT11 / Letter 1058
- IRS First-Time Penalty Abatement (Form 843 / IRM 20.1.1.3.3.2.1) & Reasonable Cause Guide
- How to Stop an Active IRS Wage Garnishment or Bank Levy Using Form 2848 & Form 12153
- Return to Settle My Tax Homepage & Payment Calculator