Do I have the right to negotiate my terms?

You can negotiate with IRS. While you can directly work with the IRS to reach a tax settlement, it is worth taking advantage of a complimentary consultation from qualified professionals before you begin to negotiate a fair settlement you can live with. It can be difficult to decide whether you want to go it alone or work with an IRS-certified, approved Enrolled Agent and qualified Tax Negotiator. However, working with someone with experience can make a big difference in the outcome and amount of your settlement.

What is the IRS willing to settle for?

You might be surprised at how little you realize! The IRS assigns agents who collect back taxes from taxpayers. Their goal is to collect as much tax revenue as possible and increase tax revenues. To achieve their goals, they will use every opportunity and tool at their disposal. This often means that the taxpayer does not get the best deal. An IRS Tax Negotiator's goal is to negotiate a settlement that minimizes back tax debt and create a payment program that allows you to pay off the rest of the debt.

What is the best way to get a settlement?

Your negotiation goal is to reach an agreement you can live with, and that will allow you to repay your tax debt. Sometimes, the reality of your situation may force you to liquidate assets, cash in retirement savings, or sell possessions. An Offer In Compromise (OIC ) is the agreement you desire. This is simply an agreement between yourself and the IRS to pay less tax than you owe. Sometimes, this program is called a " fresh Start". You have two options for payment: a lump sum payment of the amount owed or a monthly payment plan in which you agree to pay a set amount each month. The IRS has guidelines about what it will accept and how long it will allow you to make payments. You make the offer, and the IRS can either reject it or accept it.

You should be able to determine the maximum amount you can offer the IRS after you have completed the Offer In Compromise Form 656. An experienced tax professional can make all the difference in this area. To evaluate your offer, the IRS will charge $150 for an application fee. It can be expensive to make mistakes or have your offer rejected. Tax liability does not include the $150. It's only the application fee.

Negotiate with IRS How do I prepare?

Before you can negotiate with the IRS, you must first ensure that you have filed all required tax returns. If you're a business owner, make the estimated payments to the IRS and pay any tax deposits if applicable. Start by reviewing Form 656. Next, gather all necessary documents to answer any questions. They will need documentation about your bank accounts, investments, credit cards balances, available credit, income, and how much you owe.

These Myths about the IRS Compromise Are Not True

The offer in compromise is an IRS option to "settle tax debt".

The majority of people who hear about the program either have one or both of these reactions.

It sounds too good to be true, and it is not a valid option.
If I am a skilled negotiator, I can negotiate the best deals with the IRS.

Both of these perspectives are incorrect. Here's why.

Myth 1 - "Settlement is too good for it to be true"

It exists, and it works well for some people. The IRS isn't going to spend the 10 years it takes to collect tax debt from people who can't pay.

The IRS offers in compromise program that gives qualified taxpayers in difficult circumstances a fresh start. The IRS will accept a settlement amount in exchange for the discharge of any remaining debt. To keep an agreement, people who accept a compromise offer must also adhere to other conditions. For example, they must agree to allow the IRS to keep their refund for the next year and to file and pay all taxes for the next five.

Myth 2 - "The key to settling tax owed is negotiating with IRS."

A compromise program does not require you to be a good negotiator. This incorrect assumption leads people to believe they can simply lowball the government and stick to their positions, maybe walk away once or twice, then come back with a huge offer amount.

It is easy math to get a compromise offer. The IRS will calculate your income, assets, and allowable expenses based on the financial statements and documentation you submit. The IRS will calculate the amount it thinks is reasonable to collect from your account.

An experienced tax professional can help determine the right offer amount by educating you about the IRS standards and the expenses that you can and cannot include. Although there are some gray areas, these are all based on the expenses that should be allowed.

Find the facts instead

Avoid any tax professional that promises a compromise but doesn't know anything about your financial situation.

If you have a tax debt you are unable to pay, consider whether an offer in compromise might be a good option. This is especially true if your assets are low, you live modestly, and struggle to make ends meet each month.

Even if you are not eligible for an offer of compromise, you might still be eligible for deferred payments or a monthly payment plan. Learn what unpaid taxes might mean to you.

Taxes and death are two of life's great certainty, but each year, a large number of taxpayers act as though they don't understand the maxim.

It is almost always a bad idea to fall behind in income tax payments. You will not only owe the government money but the government will eventually catch up and send you a bill with interest for the amount you haven't paid. The worst part is that the government will eventually catch on and hit you with a bill for what you didn't pay with interest.

The IRS can sometimes make a deal with people who can prove that they cannot pay taxes because they don't have enough money and not because they are trying to cheat the government. The IRS has options for those who are unable to pay their tax debt immediately but want to settle it. It is important to fully understand all options so that you can choose the best strategy for yourself.

Installment Plans

Installment plans work like home mortgages except that instead of paying a lender each month, you pay the IRS every other month.

An agreement with the IRS is a tax-payment installment plan. You must meet the following requirements to be eligible for the installment plan:

Tax returns are filed on time.
Most of the state income taxes and late fees will be paid.
The IRS will require that you make minimum monthly payments.

It is not always possible to qualify for a tax installment program. As a tax collection agency, the IRS prefers to receive tax payments over not receiving them. However, the IRS is not interested in entering into a payment arrangement with truant taxpayers who are unable to pay the monthly installments.

If you have more than $50,000 of arrears, the IRS will not deal with you. The IRS will calculate a monthly payment if you meet the debt criteria and have filed all your tax returns. To discuss your options and negotiate a payment plan with IRS, you should consult a tax resolution specialist or an attorney who specializes in tax debt.

Compromise or Offer

Sometimes, the IRS may consider a settlement that allows you to pay less back taxes. This is known as an offer in compromise. The IRS will accept your offer of compromise if you convince them that you cannot afford to pay back the amount owed.

Although you may have seen advertisements implying that it is easy to pay the IRS pennies per dollar, these ads are misleading. You will need to fill out a special form when you propose a compromise. It costs $186. This form will require detailed information about your income and spending habits, assets, as well as any equity in investments. You will need to provide a collection statement if you work for wages or your salary. This information is used to assess your ability to pay.

The IRS will evaluate your application by looking at your net worth, credit card sources, and home equity lines of credit. The IRS will then evaluate your income and monthly expenses to determine how much you can afford each month.

If you have an active bankruptcy filing, you can't apply for a compromise. You will have two years to settle tax debt if you accept a compromise agreement.

Garnishments for Release Wage

The IRS can garnish wages if you owe money but have not reached a payment arrangement. The IRS can also garnish federal payments (Social Security and tax refunds, etc.). You can't collect your tax debt until it is paid in full or the statutory time limit has expired. Contact the IRS to request a modification if you are subject to garnishment or can't pay your tax debt. The amount garnished by the IRS might be reduced if the IRS agrees.

Innocent Spouse Programs

Even if you're legally separated, if you file a joint return, you could be held responsible for any underpayment. The IRS provides some relief to married and separated couples if a spouse or ex-spouse hides a tax obligation from the other.

One partner may seek relief from tax liability if the other partner can prove that they failed to report income or reported income incorrectly.

Innocent spouse relief is only available if you can prove that your spouse has misled you. This could be by not reporting income or taking deductions and credits that were not allowed. You generally have two years to file for relief from the date the IRS attempted to collect unpaid taxes.

Two other provisions are available from the IRS for couples who have a problem with tax reporting:

Separation of liability relief provides an exemption for legally separated or divorcing partners who have not lived in the same household for twelve months before a relief application. This relief is available to couples who jointly filed a tax return and understated the amount owed.
If the spouses are unable to qualify for either innocent spouse relief or separation liability relief, they may be eligible for equitable tax relief. Equitable relief can only be granted if the spouses can prove that the spouse was responsible for something not reported on the joint tax return. Equitable relief is also available if the tax reported on the joint returns was correct, but not paid with it.

The Innocent Spouse program is complicated. The IRS has a publication that explains the programs and provides a form to request relief.

Statute of Limitations

The IRS has a period of 10 years to collect taxes, interest, and penalties. This is typically a few years after the filing date. Sometimes, tax lawyers and other advisors will try to use the statute of limitation to resolve tax cases. The IRS can attempt to collect tax debts, but taxpayers have the option to file collection appeals to stop a tax lien, levy, or seizure.

It is risky to try to delay the statute of limitations. Failure to pay interest or penalties will result in your liability for higher payment to the government.

Currently not collectible

The IRS may place your case on hold if you can provide reasons for not being able to pay tax now. This will make it non-collectible. The status of "not collectible", however, is temporary and the IRS will inform you when you are expected to pay. This distinction has the advantage of putting a stop to tax levies and wage garnishments as well as liens on your property.

Get in touch with a tax professional

It is worth looking into the possibility of hiring a tax professional to assist you in your compromise application. It might be a good idea to hire a tax professional or attorney to help you with your compromise application if the IRS has complicated your case and there are high amounts of back taxes, interest, penalties, and so forth.

It's best to contact IRS directly if you owe less than $10,000. If you have more than $10,000 in debt but less than $25,000, it is a good idea to seek the guidance of a tax professional or lawyer. Contact a professional if your tax debt is more than $25,000

Bankruptcy: Is it Even Possible?

Although bankruptcy can help you eliminate tax debt, it is not always a guarantee. To determine if you are eligible for a discharge of your tax debt, you need to look at your finances through Chapter 7 and Chapter 13 bankruptcy codes. Remember that bankruptcy can have serious financial consequences. This can make borrowing very difficult for many years. You may also have to liquidate most of your assets to satisfy creditors.

Other tax relief options

An IRS installment payment plan is available if you can reduce your tax debt to less than $50,000. You might consider using credit cards that provide cash-back rewards to reduce your tax debt by up to $50,000.

It's a bad idea to accumulate credit card debt you can't pay off in a month. However, if you can avoid IRS penalties, it may work. Make a budget before you use credit cards to pay taxes. Talking about your plan with a credit counselor or debt management professional is also advisable.

Make sure that you pay all installments on time if you have an installment agreement with IRS. If you don't adhere to your agreement, the IRS will quickly penalize you and add back interest to your tax debt.