Why high-net-worth cases need a different approach

High‑net‑worth individuals (HNWIs) typically bring layered issues the IRS must consider: multiple income streams, trusts and partnerships, illiquid but high‑value assets (real estate, art, business interests), and cross‑border holdings. The IRS evaluates ability to pay based on both income and equity, so strategies that assume simple wage income or bank balances often fail. In my practice of 15+ years, tailored plans that reconcile liquidity with long‑term asset value produce better outcomes than one‑size‑fits‑all offers.

How offer strategies for HNWIs differ (practical summary)

  • Asset valuation and liquidity first: The IRS wants realistic current market value and reasonable liquidation timelines. For HNWIs, reducing a liability often depends on robust, third‑party appraisals and a clear plan to monetize assets when needed (see IRS Offer in Compromise guidance: https://www.irs.gov/individuals/offer-in-compromise).
  • Emphasize cash‑flow‑based installment offers: Instead of focusing solely on net worth, structure installment agreements around predictable income from investments or rental properties—matching payment timing to expected receipts.
  • Use partial‑payment strategies strategically: Partial Payment Installment Agreements (PPIA) can be preferable when assets are illiquid but income is sufficient to make structured payments. Compare options in our guide: Offer in Compromise vs Partial Payment Installment Agreements: Pros and Cons.
  • Leverage trust and entity analysis: Trust‑owned assets or family‑office structures change what the IRS counts as available. Proper legal structuring and documented separation can matter during negotiations.
  • Prepare exhaustive financial statements: HNWI offers depend on detailed disclosures—business valuations, partnership K‑1s, trust accountings, and asset appraisals. See Preparing a Financial Statement for an Offer in Compromise for documentation expectations.

Key tactics and when to use them

  1. Offer in Compromise (OIC) with professional backup
  • Use when reasonable collection potential (RCP) calculations—based on income, assets, and allowable expenses—support a lesser amount. For HNWIs, include certified appraisals and independent valuations to justify discounts. (IRS OIC page: https://www.irs.gov/individuals/offer-in-compromise)
  1. Structured partial‑payment installment agreements
  • Best when liquidity is limited but recurring cash flow exists. Negotiate terms that allow seasonal or variable payments keyed to investment distributions.
  1. Collateral and staged liquidation plans
  • Where selling assets immediately would cause severe loss, propose staged liquidation with escrowed proceeds or court‑appointed appraisals to assure the IRS of future payment ability.
  1. Use of third‑party financing and refinancing
  • Low‑interest loans against liquid holdings or margin facilities can sometimes be cheaper than penalties and accruing tax interest—but beware personal risk and margin calls.

Real‑world example (anonymized)

A client with $2.6M in tax liabilities and most wealth tied to a commercial property portfolio could not raise a lump sum. We assembled professional appraisals, projected net cash flow from leases for five years, and proposed a partial‑payment installment plan tied to rent receipts. The IRS accepted a smaller up‑front payment and a structured schedule because the submission demonstrated realistic future receipts and conservative valuations.

Common mistakes to avoid

  • Relying on headline net worth without proving liquidity or showing realistic sale timelines.
  • Skipping certified appraisals for high‑value, non‑market assets (art, business interests).
  • Underestimating the need for cross‑entity documentation (trust accountings, partnership allocations).

Professional tips

  • Start early: routine tax reviews and proactive disclosures reduce leverage gaps during negotiation.
  • Use specialized representation: CPAs, tax attorneys, and enrolled agents experienced with HNWI cases reduce errors and improve acceptances.
  • Document conservatively: the IRS responds better to cautious valuations and verifiable cash‑flow forecasts.
  • Consider tax‑efficient financing only after stress‑testing worst‑case scenarios.

Where to learn more

Authoritative sources and further reading

Professional disclaimer

This article is educational and does not constitute tax, legal, or investment advice. High‑net‑worth tax cases are complex—consult a qualified tax attorney, CPA, or enrolled agent to analyze your specific facts before acting.