Shocking $1.3M Lesson: 7 Costly Offer in Compromise Mistakes to Avoid (From a Real IRS Case)

Tax Relief Insights & IRS Help Articles

What happened—and why it matters to you

A Rhode Island business owner, William N. L’Europa, just pleaded guilty—again—to federal tax charges after failing to pay more than $1.3 million in taxes, penalties, fees, and interest spanning 2007–2013. As part of his plea, he must pay $1,367,336.08 and faces sentencing on November 12, 2025. Prosecutors say he also tried to cut his bill using an Offer in Compromise (OIC) while understating his income and using business funds for personal expenses (motorcycle, a new truck downpayment, and more). This case shows exactly how not to approach an OIC. IRS Department of Justice

Why this story is a wake-up call

OICs are legitimate tools for taxpayers who can’t pay their full liability, but they require complete honesty and thorough documentation. Misrepresentations can trigger criminal exposure and wipe out your chance at relief. IRS Criminal Investigation regularly brings these cases to court—and its conviction rate hovers around 90% in recent years. IRS

Offer in Compromise 101: The right way to seek real relief

An Offer in Compromise lets qualified taxpayers settle for less than the full amount owed when paying in full would create financial hardship. Learn the IRS rules, eligibility, and documentation requirements directly from the source:

IRS OIC overview: irs.gov/payments/offer-in-compromise; IRS
Form 656 (apply for an OIC): irs.gov/forms-pubs/about-form-656; IRS
IRS OIC Pre-Qualifier tool: irs.treasury.gov/oic_pre_qualifier; irs.treasury.gov

Inbound resources from IRSProb:

If you’re exploring an OIC, start with our plain-English guides and case approach:

Offer in Compromise (service page)
Mastering the Offer in Compromise Process
Beware of “OIC mills”

7 costly OIC mistakes to avoid (learn from the L’Europa case)

1) Hiding or downplaying income

Submitting forms that suggest “little or no income” when that isn’t true can derail your case and lead to prosecution. The IRS compares your statements with third-party reports, bank data, business records, and more. IRS

2) Running personal expenses through a business

Using business accounts to pay personal items (e.g., vehicles, personal debts) and then underreporting income is a fast track to a criminal referral—exactly what the IRS alleged here. IRS

3) Filing an OIC before you’re actually eligible

You must be in compliance (required returns filed, estimated payments current if applicable). If you don’t meet the baseline, your offer can be returned without review. See the IRS program rules and Form 656 instructions. IRS+1

4) Guessing your numbers

The IRS evaluates your reasonable collection potential (income, expenses under national/local standards, and asset equity). Unsupported numbers or missing documents sink otherwise viable offers. IRS

5) Relying on high-pressure “pennies on the dollar” pitches

Third-party “OIC mills” often overpromise and underdeliver. If you need help, work with a reputable professional—or get free/low-cost assistance from a Low-Income Taxpayer Clinic (LITC). IRSProb; IRS

Find LITCs: irs.gov/advocate/low-income-taxpayer-clinics (current list PDF: Publication 4134) IRS+1

6) Ignoring safer, temporary options

If an OIC isn’t right now, consider Installment Agreements or Currently Not Collectible (CNC) status while you regroup. The Taxpayer Advocate explains CNC here; you can also review IRS guidance on temporary collection delays. Taxpayer Advocate Service; IRS

7) Forgetting what happens after a plea or judgment

Sentencing in federal cases considers the U.S. Sentencing Guidelines along with other statutory factors, which can include restitution and supervision terms. Department of Justice; United States Sentencing Commission

What this real case teaches about Offers in Compromise

Truth beats tactics. The OIC program can change lives when used correctly; misstatements erase that chance and invite criminal consequences. IRS

Documentation is destiny. The IRS won’t accept an offer that doesn’t reflect your full financial picture. Start with the IRS’ own OIC page and Form 656 instructions to understand the documentation needed. IRS+1

Enforcement is real. IRS-CI’s conviction rate sits around 90%—a reminder that cutting corners with the IRS is a losing strategy. IRS

Need help now? Start the right way

If you’re considering an Offer in Compromise—or you’ve been contacted by the IRS—talk to a pro before you file anything.

Start with IRSProb: irsprob.com (request a consultation)
Learn more about our OIC approach: Offer in Compromise (service page)
Prefer DIY first? Use the IRS OIC Pre-Qualifier to see whether an offer might fit your situation. irs.treasury.gov

Sources and further reading

Case details & plea announcement: IRS-CI release and DOJ/USAO-RI press release (includes restitution amount and sentencing date). IRS; Department of Justice
IRS Offer in Compromise program: eligibility, standards, and forms. IRS+1
IRS OIC pre-qualifier tool: quick eligibility check. irs.treasury.gov
IRS-CI conviction rate / enforcement stats: Annual report highlights. IRS
U.S. Sentencing Guidelines: how judges consider sentencing in federal cases. United States Sentencing Commission