The IRS can take 15% of your Social Security payments to satisfy your tax debt. Prior to 1996, there was a $750/month "off limits" amount that had to be left for the Social Security recipient.
Is it really possible to pay the IRS "pennies on the dollar" and have the rest of your tax bill forgiven? Yes – it is possible...but it's not very likely. It's called an Offer-In-Compromise and it used to be the only legitimate way to negotiate an actual lowering of the amount of taxes owed to the IRS by a taxpayer...sometimes far less. However, since the IRS has seen so much "abuse" of this particular method of tax relief in recent years, they have shown by their actions that they are less and less apt to accept an Offer-In-Compromise.
The IRS has the power to assess penalties in over 147 different situations. Almost every person or business suffering from an IRS problem owes the IRS even more money because of penalties. What you probably don't know is that the IRS writes-off approximately 50% of all penalties. The IRS calls the act of "writing-off" or eliminating a penalty an "abatement". The IRS does not normally volunteer any information about the likelihood to do this. You MUST ask!
Penalties and interest add up by the day if you haven't paid the IRS what you owe them. And they add up big-time if you haven't filed at all. Every day that you put off taking care of your IRS problem only makes it worse. Did You File and Not Pay? If you did, there's interest being compounded daily on what you owe, which is the quarterly federal short-term tax rate, plus 3%. As of this writing, the IRS is charging 4% per year.