Can You Negotiate With The IRS?
Key takeaways
As a result of the Fresh Start Program of 2011, the dollar threshold at which liens may be issued was raised, which has led to a reduction in the number of liens.
Taxpayers can pay the offer amount all at once or in installments.
When a taxpayer submits an offer request to pay in one sum of cash, the taxpayer must enclose with their Form 656 a nonrefundable payment equivalent to twenty percent of the amount offered.
If you owe money to the IRS, have a tax audit, and your tax debt is significant, it might be wise to consult with a tax attorney or a tax professional to help you find a suitable way out.
For example, the IRS offers an installment agreement where you can pay a monthly amount towards your total tax debt.
Your current financial standing will be the primary factor considered when determining whether or not to grant your request for an installment plan, an offer in compromise, or a collection delay.
If you have the financial ability to pay your burden, the IRS is unlikely to make many concessions.
Taxpayers with a modest income may be eligible for a fee waiver from the IRS. If you owe less than $50,000, you may qualify for a more simplified payment plan of 72 months.
If you cannot pay for the installment program, the IRS will analyze your financial situation to decide what you are capable of paying for.
Generally, the IRS will try to arrange a payment arrangement in the form of monthly payments to relieve your debt.
At the very least, submit your return when you owe taxes and be as proactive as possible.
If your debt burdens you, getting professional help or a free consult from the IRS is advisable.
It Is Possible to Negotiate With the IRS—Here Is How to lower your tax liability
Tax season has arrived once more at this point in the year. By the time the April 15 deadline for filing and paying personal taxes may roll around, you’ll discover that you owe more money in taxes than you are now able to pay. This is a very irritating situation. If this is the case, there is no need for you to feel hopeless because there are various methods by which you may negotiate with the Internal Revenue Service (IRS) to assist in resolving your tax issues. The first steps are outlined below for you.
As a result of the IRS Fresh Start Program of 2011, the dollar threshold at which liens may be issued was raised, which has led to a reduction in the number of liens. This means that the IRS is actively working on finding solutions to issues among more taxpayers. This article will explain who is eligible for tax relief, and how you can arrange a solution with the IRS.
Who Can Be a Candidate?
Utilizing the Offer in Compromise Pre-Qualifier Tool, you may verify that you are eligible for the program and create a tentative proposal for relieving some of your debt.
If any of the several factors apply to you, you may apply for an Offer in Compromise:
You completed all applicable tax returns, including anticipated payments, and filed all needed returns.
You are not currently involved in an active bankruptcy process
You have a legitimate extension for a return for the current year (if applying for the current year)
Before applying, you must demonstrate that you are an employer and have paid tax deposits for the current and preceding two quarters. If you can’t, you will not be accepted into the offer in the compromise program.
Payment Options
Offer in Full (Lump Sum Cash Offer)
Taxpayers can pay the offer amount all at once or in installments. A “lump sum cash offer” is an offer that is due in five or fewer payments within five or fewer months after the offer is accepted. This type of offer is also known as a “one-time cash payment.”
When a taxpayer submits an offer request to pay in one lump sum of cash, the taxpayer must enclose with their Form 656 a nonrefundable payment equivalent to twenty percent of the amount being offered. In addition to the charge for applying, this payment is also necessary.
The first payment of twenty percent is often nonrefundable, which means that it will not be refunded to the taxpayer under any circumstances, even when the offer is declined or sent back to the taxpayer without acceptance. Instead, the twenty percent of the payment that was made will be added to the taxpayer’s overall tax due. The taxpayer has the opportunity to direct the Internal Revenue Service (IRS) to use the 20 percent contribution toward a particular tax burden.
Periodic Payment Offer
According to tax legislation, an offer is considered a “periodic payment offer” if it is due in six or more monthly payments and must be completed within twenty-four months of the offer being accepted.
When making an offer to make monthly payments over a set time, the taxpayer must submit a new Form 656 along with the first proposed monthly payment. In addition to the application fee, which is also necessary to pay. This money is often nonrefundable to your bank account, similar to the 20 percent down payment necessary for an offer denominated in a one-time sum of cash.
The IRS accepts a periodic payment offer when the taxpayer is required to continue making the installment payments stipulated in the offer’s conditions. These sums are also not subject to a return policy. These amounts are applied to the tax obligations, and the taxpayer has the right to designate the exact tax liabilities to which the periodic payments will be made. Additionally, the amounts are applied to the tax liabilities in the order that they were specified by the taxpayer.
The taxpayer is no longer permitted to assign offer payments to any tax burden that is clearly included in the offer agreement once they have accepted an offer in compromise.
Always submit your tax return.
No matter how helpful it is for the IRS to give extra choices to taxpayers who are having difficulty, you are still responsible for simply paying your tax bill and resolving your tax liability.
If you owe money to the IRS, have a tax audit coming up, and your tax debt is significant, it might be wise to consult with a tax attorney or a tax professional to help you find a suitable way out. In addition, a tax professional can help you with your tax return and tax preparation moving forward.
For example, the IRS offers an installment agreement where you can pay a monthly amount towards your total tax debt. Initial payment is not required, however, it’s recommendable to relieve some of your total tax debt as soon as possible. For more information on tax bills, and resolving tax liability, you can visit the IRS website.
Stay consistent with your payments.
Make sure you don’t miss any payments you owe to the IRS because of this. If you breach the conditions of your agreement, the Internal Revenue Service (IRS) may attach and confiscate any property that you hold, including your bank accounts. It may even place a lien on your residence or bank account.
Alternatives for Those Who Are Behind on Their Payments
You shouldn’t allow things to reach that stage. As soon as you are served with the initial notification for overdue taxes, you must respond.
When it comes to making up for delinquent tax payments, taxpayers have three options:
A taxpayer who has entered into a payment agreement will make payments toward the total amount owed over a period of time.
An offer in compromise requires the taxpayer to make a single payment in an amount that is less than the total amount of taxes that are owed.
The taxpayer can request the IRS to temporarily postpone collection activities until such time as the taxpayer’s financial position improves.
Remember that even a momentary lapse in the collection of your taxes will result in an increase in the amount you owe since penalties and interest will continue to be assessed until the full amount is paid.
Your financial situation is decisive
The IRS is often extremely responsive to any of the following. Your current financial standing will be the primary factor considered when determining whether or not to grant your request for an installment plan, an offer in compromise, or a collection delay.
You are going to have to fill out some paperwork that attests to all of your assets and obligations, income sources, and debts. If you have the financial ability in terms of income and assets to pay your tax burden, the IRS is unlikely to make many concessions.
What It All Comes Down To – Unpaid taxes
Nobody is suggesting that the federal government is feeling particularly warm and cuddly about overdue payments. However, there are programs available via the IRS that can help Americans bring their tax situations under control, even with low income. The secret is to move rapidly and locate a solution as soon as possible.
Getting Assistance from Qualified Professionals
In most cases, having the assistance of a trained and experienced tax representative may be of tremendous use when negotiating the most beneficial feasible compromise or payment arrangement.
Brown advises consumers to be wary of businesses that promote on late-night television using catchphrases such as “pennies on the dollar” or “1-800 number.” As he describes it, “in many situations, these organizations will simply accept a customer’s money and do no or little services.” A significant number of these companies have been subject to legal action in their respective states on charges of engaging in unethical or misleading business practices.
There are a lot of attorneys and Certified Public Accountants (CPAs) that handle tax planning, but they hardly ever talk to the IRS. Your representative should have much expertise in dealing with the IRS in matters involving unpaid back taxes and can provide legal advice to deal with tax preparation and to help relieve your tax debt.
Penalties Eligible for Relief
Included in the list of penalties eligible for penalty remission are the following:
– A Report on Information Return
– The Inability to File
– Inability to Make Payments
– Concerning Matters of Accuracy
– The Omission of a Deposit
– Check With A Bad Reputation
– Estimated Taxes Owed by Corporations That Were Not Paid in Full
– The Failure of Individuals to Adequately Pay Their Estimated Taxes
– Additional fines following applicable laws
Plan for Payouts Over a Limited Timeframe
If the total amount of taxes, penalties, and interest you owe is less than one hundred thousand dollars, you may be eligible for a short-term payment plan that lasts between one hundred twenty and one hundred eighty days. You can submit a free application in person, online, or through the mail. Your payment choices include:
Withdrawals made in an automated fashion from your checking account
Check
Postal money order
Debit or credit card
Payment Strategy for the Long Term
Long-term refers to an engagement that is longer than one hundred and twenty days. You are required to pay through an automatic withdrawal arrangement from your income, which may be filed for $31 online or for $107 by phone, mail, or in person, respectively. Taxpayers with a modest income may be eligible for a fee waiver from the IRS.
If you owe less than $50,000, you may be eligible for a more simplified payment plan of 72 months. Yay! To pay it off will take you six years. Boo! You will incur accruing interest and penalties until such time as you pay the debt.
If you are unable to pay the monthly amount throughout a six-year plan, the IRS will reevaluate your financial information and place you on a project that is tailored to your needs. If your income is low, you might qualify for other programs with the IRS.
If you owe more than $50,000 in back taxes, the IRS accepts you on a payment plan that is calculated according to certain qualifications. However, the IRS can place you on this kind of plan even if they do not look at your financial information. If you are unable to pay for the program, the IRS will analyze your financial situation to decide what you are capable of paying for. If you have to pay taxes, it’s best to look at the IRS website to find out what you can do to come to an agreement for repaying your full tax liability.
A proposal for a middle ground
You may qualify for an offer in compromise if you can demonstrate to the IRS that you are unable to pay the total amount owed. The amount paid to settle the dispute is lower than the total amount owed. Still, you must establish you cannot pay your total tax amount plus interest and penalties under any circumstances.
To qualify for the offer in the compromise program, you need to owe money or have back taxes. After this, there are a few cases in which the IRS might accept an offer in compromise:
First, if there is a question as to responsibility, the IRS may accept a compromise. Only when there is an actual disagreement over whether or how much the exact tax debt is due under the law can a compromise satisfy this requirement.
Secondly, if there is any dispute regarding the amount owing being completely recoverable, the IRS may consider a compromise. Any situation where the taxpayer’s income and assets are less than the total tax due raises questions about whether it can be collected.
Third, the IRS may agree to a compromise if it would result in efficient tax administration. When there is no question that the tax is owed and that the entire amount owed can be obtained, an offer may be accepted on the basis of effective tax administration even though requiring a full payment would either put the offerer in a difficult financial situation or be unfair and inequitable due to exceptional circumstances.
The IRS typically accepts fewer than half of the compromise proposals that it is presented with. Generally, the IRS will try to arrange a payment arrangement in the form of monthly payments to relieve your debt. To elaborate, you can make a single payment of the reduced amount or pay it off in several shorter-term payments. If you choose this path, you will be required to complete a substantial amount of documentation and pay an application fee for non-refundable filing totaling $205. However, the IRS will no longer pursue collection actions against you after you file.
Currently Not Collectible Status
You run the risk of being labeled as presently not collectible (CNC) if you cannot make payments on time but believe that you will be able to do so in the future.
By filling out the Collection Information form, you can make a request for a delay in the collection process and provide evidence that your financial situation is dire at the moment but that you are expecting an incoming shipment. Once your application is approved, your CNC status is active.
Therefore, you have choices for paying back the money you owe in back taxes, and the IRS is willing to engage in negotiation with you. At the very least, submit your tax taxes and try to be as proactive as possible. Then you need to contact Uncle Sam as soon as possible to figure out how to pay the taxes and start the application process.
Contact a tax professional to relieve your tax debt and lower your tax bill with the IRS.
Contact one of the top tax professionals at Ideal Tax if you have unpaid back taxes and are unsure where to begin or if the prospect of dealing with the IRS makes you uneasy. In addition, with a professional, you can figure out your financial condition and your new financial situation after a negotiated agreement through the IRS’ forgiveness program. Alternatively, you can visit the IRS website to find more information on your tax return.
Since the IRS cannot cause financial hardship, the IRS offers a program to relieve taxpayers from additional penalties and late fees, through the use of a payment option. When household expenses are too high, and potential savings are going towards debt, an IRS agent can offer installment agreements, after which the IRS evaluates whether the IRS payment plans are in line with the total income of that family. If the IRS believes it’s still causing financial hardship after a payment agreement, a taxpayer could qualify for an offer in compromise, relieving a part of the remaining balance.
Contact one of our trusted professionals to find a suitable solution
At Ideal Tax, we know about existing IRS criteria. Ideal Tax can assist you in a tax negotiation with the IRS to resolve your tax issues. Contact us today!
Luis serves as the Director of Operations for Ideal Tax, overseeing a multifaceted team including case management, tax professionals, document specialists, customer support, training, and development.
