Couple things you need to know.
Just because the IRS says you owe it, does not mean you owe it. The IRS [censored]s up all of the time, and it is one of the worst entities in the world for the left hand to know what the right hand is doing. I have a client that made mid six figures in a year, and paid a [censored] load of taxes. The IRS decided that the client over paid, and sent a large check to the state Dept of Revenue. Then, years later, the IRS decided that the tax was greater than what they had earlier decided, and hit up the client for fees and penalties for underpaying, despite the fact that it was the IRS that had sent the money to the state dept of revenue. The IRS says that because the tax was not paid, a huge penalty and fees has to be paid by the client because the IRS decided to send the money originally sent to the IRS to someone else. The IRS took other years returns from the client, waited several years, and then said that the tax returns were not filed. They disallowed the deductions because they had no canceled checks, as they waited to spring the "not filed" thing on the client after the date that the bank kept old checks had passed (six years).
Finally, this should help. One of the factors to be considered by the IRS in reviewing the matter at hand, while not at all conclusive or binding, is or not whether the tax payer actually ever owed the tax. IOW, even if the tax assessment is wrong, if the tax payer missed some challenge or appeal period, and did not actually owe the tax, the IRS is not required to stop pursuit of back taxes EVEN IF IT IS CLEAR THAT THE TAXES ARE NOT VALID. That fact, a bogus tax claim, it is only one the factors to be considered in the mix. The fact that the tax assessment is not valid or correct is only one factor to be considered, and it is not dispositive, should tell you all you need to know about the IRS.
Most of the settlements for pennies on the dollar are because the f-ing taxes were never owed in the first place. The rest are just people too poor to pay what the IRS wants, but can pay something.
