I’m Darrin Mish. Tampa tax attorney, 32 years in, more than $100 million in IRS debt resolved. What follows isn’t theory – it’s what I’ve actually watched work.
Here’s a story that should make every taxpayer who’s ever fought the IRS smile. A woman in Ohio had a $7,970 tax dispute with the IRS—a relatively small amount in the grand scheme of tax litigation. But because her attorney made one brilliant strategic move, the IRS ended up paying not only the $7,970 refund but also an additional $34,081 in attorney fees.
That’s right. The IRS’s stubbornness turned a small tax case into a $42,051 bill for the government. And the tool her attorney used? It’s available to every single taxpayer who ends up in a dispute with the IRS. It’s called a “qualified offer,” and if you’ve never heard of it, you need to understand how it works.
The Backstory: A Taxpayer Who Wouldn’t Take No for an Answer
Crystal Greenwald, an Ohio resident, earned a little over $11,000 in 2020. She filed her tax return primarily to claim two credits: a $5,920 earned income tax credit (EITC) and a $2,050 child tax credit. Together, those credits totaled $7,970—money she was counting on.
The IRS denied both credits. Their reason? Crystal failed to prove that the two children involved had lived with her for more than six months during 2020. The only documentation she submitted were court records showing the children had been removed from her custody on August 1, 2020. On its face, that wasn’t exactly compelling evidence that the children had lived with her for more than half the year.
But Crystal refused to accept the IRS’s decision. When the IRS wouldn’t pay her the credits, she filed a claim for refund. The IRS denied that too. So Crystal did what most taxpayers in her position wouldn’t have the courage or resources to do—she hired an attorney and filed suit against the IRS in U.S. District Court.
The Qualified Offer: The Strategic Move That Changed Everything
This is where the case gets really interesting, and where there’s a powerful lesson for anyone dealing with an IRS tax dispute.
Crystal’s attorney made a formal “qualified offer” to the IRS under Internal Revenue Code Section 7430(g). The offer was straightforward: Crystal would settle the case for $7,970—the exact amount of the credits she had claimed on her return.
The IRS had 90 days to respond to the qualified offer. They didn’t respond at all. Under the qualified offer rules, silence equals rejection. The IRS effectively turned down Crystal’s offer to resolve the entire case for the amount in dispute.
Eventually, the IRS did pay Crystal the $7,970 refund through an administrative action. Case closed on the tax side. But the story was far from over.
Why the Qualified Offer Rule Is Such a Powerful Weapon Against the IRS
Here’s where the qualified offer rule really shows its teeth, and why every taxpayer fighting the IRS should understand how it works.
Normally, even if you beat the IRS in court, collecting attorney fees is extremely difficult. You have to prove that the IRS’s position was “not substantially justified”—a legal standard that’s notoriously hard to meet. The IRS can take an aggressive, even wrong position, and as long as they can point to some reasonable basis for it, you’re stuck paying your own attorney fees even when you win.
The qualified offer rule changes that calculus dramatically.
When a taxpayer makes a qualified offer and the IRS either rejects it or ignores it (as they did in Crystal’s case), and the final outcome is equal to or better than the offer amount, the taxpayer is entitled to attorney fees from the date of the offer forward. The taxpayer doesn’t need to prove the IRS’s position was unjustified. They just need to show they were the “prevailing party”—meaning the IRS’s final result was no better than what the taxpayer offered.
Crystal offered $7,970. The IRS eventually paid $7,970. Crystal was the prevailing party, and the qualified offer rule entitled her to attorney fees without having to prove the IRS’s position was unreasonable.
The result? The court awarded Crystal $34,081 in attorney fees on top of her $7,970 refund. The IRS’s total bill: $42,051—all because they ignored a reasonable offer to settle a small case.
The Settlement Trap the IRS Tried to Use
The IRS didn’t give up easily on the attorney fees issue. They argued that because they paid Crystal’s refund through an administrative action rather than through a court judgment, the case had essentially been “settled.” This distinction matters because the qualified offer rule specifically doesn’t apply to settlements. If the case was settled, Crystal would have needed to prove the IRS’s position was unreasonable—and given her weak documentation, that would have been nearly impossible.
But the court rejected the IRS’s argument. The court found that paying a refund through an administrative process is not the same thing as a settlement. A settlement requires mutual agreement and compromise. Here, the IRS simply paid what Crystal was owed. No negotiation. No mutual agreement. Just a payment.
This is an important distinction for taxpayers to understand. If the IRS eventually concedes and pays your claim without a formal settlement agreement, that’s not a settlement—and the qualified offer rule still applies.
How the Qualified Offer Works: A Step-by-Step Breakdown for Taxpayers
If you’re in a dispute with the IRS and you’re considering litigation, here’s how the qualified offer strategy works:
Step 1: Make the offer in writing. The qualified offer must be in writing, must specify the amount you’re willing to accept, and must be made during the “qualified offer period”—generally from the date the IRS first makes a written demand through the date that’s 30 days before the trial begins.
Step 2: Wait for the IRS response. The IRS has 90 days to accept or reject your offer. If they don’t respond within 90 days, the offer is deemed rejected.
Step 3: Proceed with your case. If the IRS rejects or ignores your offer, continue litigating your case.
Step 4: Compare the final result to your offer. If the final tax liability determined by the court (or paid by the IRS) is equal to or less than the amount you offered, you are the prevailing party.
Step 5: File for attorney fees. Once you’ve established that the final result was no better than your qualified offer, you can petition the court for attorney fees from the date of the offer forward.
The beauty of this approach is that it shifts the risk to the IRS. If they reject a reasonable offer and end up in the same place or worse, they’re on the hook for your attorney fees. It gives the IRS a strong financial incentive to take settlement offers seriously—which is exactly what Congress intended when it created this provision.
Key Takeaways for Taxpayers Fighting the IRS
The qualified offer is one of the most underused tools in tax litigation. Most taxpayers and even many tax professionals don’t know about it. If you’re facing an IRS dispute that might end up in court, ask your attorney about making a qualified offer early in the process.
Timing matters. The earlier you make the qualified offer, the more attorney fees you can potentially recover. Fees are calculated from the date of the offer forward, so an early offer maximizes your recovery if you prevail.
The IRS’s arrogance can be costly—to them. In Crystal’s case, the IRS could have resolved the entire matter for $7,970. Instead, their refusal to engage with the qualified offer cost taxpayers an additional $34,081 in attorney fees. That’s a 428% premium for stubbornness.
You don’t have to have a slam-dunk case. Crystal’s case wasn’t strong on the merits—she had weak documentation for her claimed credits. But the qualified offer rule doesn’t require you to prove the IRS was wrong. It just requires that the final result be no better than what you offered.
Don’t confuse a payment with a settlement. If the IRS eventually pays your claim without a formal settlement agreement, the qualified offer rule still applies. The IRS can’t avoid attorney fees by simply writing a check and calling it a settlement.
If you’re in a dispute with the IRS—whether it’s a few thousand dollars or a few hundred thousand dollars—the qualified offer strategy deserves serious consideration. It’s the rare tool in tax litigation that actually gives the taxpayer leverage, and as Crystal Greenwald’s case proves, it can turn a small tax fight into a very expensive lesson for the IRS.