The above formula may be applicable in cases where you owe a very large sum and you have a significant amount of disposable income. However, "doubt as to collectibility" implies the inability to pay. The IRS has been known to accept offers in compromise as low as 10%, 1%, and $1 (One Dollar), but this is, as you can imagine, very rare.
If your disposable income is $0, you do not expect to have disposable income for some years, you have special circumtances, you have zero assets and if paying this debt would cause a hardship, the IRS has been known to accept ONE DOLLAR to settle your tax liability through the Offer In Compromise. Said provision takes effect 60 days after the signing.
In a recently accepted "Offer in Compromise" filed in 2006, a family experienced the disability of the primary wage-earner. The tax liability was incurred in 1994, and had been accruing interest and penalties (leading to thousands of dollars in tax liability.) The OIC form filed by the family included the required Form 433, Collection Information
Statement and expense information (less than the accepted standard expense allowances for OIC formulation), as well as the fee waiver form that is applicable in low-income cases (this waives the otherwise required $150 OIC processing fee.) Because the family's expenses exceeded their income, the disability of the wage-earner and the lack of saleable assets, the IRS accepted their original offer of $1.
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