Negotiating with the IRS

Negotiating with the IRS

Dealing with the IRS can be intimidating and stressful, but there are ways to negotiate and settle your tax debt for less than you owe. This article will explain the different options for negotiating with the IRS, things to keep in mind, and tips for getting the best deal.

Always File Your Return

If you owe taxes you can’t pay by the filing deadline, you should still file your return on time. This prevents the IRS from preparing a substitute return for you, which could result in a larger tax bill. Filing on time also starts the clock on the statute of limitations for the IRS to collect the debt².

If you don’t file, the IRS will eventually begin aggressive collection actions like wage garnishment. Get ahead of this by filing on time, even if you can’t pay in full.

Payment Options

You have three main options for repaying back taxes under the Fresh Start program³:

• Installment agreement: Pay your tax debt in smaller, regular payments over time. You can request up to 72 months to pay it off.
• Offer in compromise: Settle your tax debt for less than the full amount owed, usually by paying a lump sum.
• Temporary delay: Request that the IRS temporarily delay collection until your financial situation improves.

The IRS will review your financial information and ability to pay when considering these options. Being transparent about your finances is important.

Installment Agreements

An installment agreement allows you to pay your tax debt in smaller, regular payments over time. The IRS will work with you to set up an affordable amount and payment schedule. Some tips:

• Aim to pay off the balance within 1-3 years if possible.
• Your proposed installment payment should align with IRS criteria based on your income and expenses.
• Interest and penalties continue accruing until the balance is paid off.
• Never miss payments once the agreement is in place.

If you can’t make your payments, contact the IRS right away to modify the agreement. Violating the terms could result in seized assets or other aggressive collection tactics⁴.

Offers in Compromise

An offer in compromise allows you to settle your tax debt for less than the full amount owed. The IRS will accept an offer if⁵:

• There is doubt you actually owe the amount due.
• You can’t fully pay the debt, based on your assets and income.
• Paying the debt would cause economic hardship.

You’ll need to submit detailed financial information and pay a non-refundable application fee. The IRS will review and determine if you qualify. If accepted, you’ll pay the compromised amount as a lump sum.

Collection Delays

If you’re facing a temporary hardship, you can request that the IRS delay collection efforts until your financial situation improves. Interest and penalties continue accruing during the delay. This option buys you some time but the debt will increase⁶.

Getting Help

Consider hiring a tax professional to assist with negotiating an installment agreement, offer in compromise, or other resolution. Look for someone experienced specifically in IRS collections and controversies. Avoid “pennies on the dollar” firms that make big promises but deliver little⁷.

A tax pro can help present your financial situation accurately, navigate IRS bureaucracy, and get the best possible deal. Just make sure to vet them thoroughly first.