Thanks to the economic insecurity of the 21st century, with The Great Recession, rampant unemployment, multinational corporations and even individuals, the IRS are having more trouble than ever before in collecting taxes owed to them. And although they may be getting more strict with overseas finances, they are more likely than ever to strike a deal with taxpayers. Here’s everything you need to know about IRS Negotiation.
What Is IRS Negotiation?
In the instance that a taxpayer is not able to pay the full amount of back taxes owed, the IRS is able to enter into an agreement with the taxpayer, for a portion of what’s owed, or for more affordable monthly payments, under the provisions of Section 6159. The IRS also has the ability to enter into an offer in compromise, which settles taxes, penalties, and interest with the taxpayer.
This was created as part of the IRS’ Fresh Start program, intended to offer tax relief to Americans behind on their taxes.
Some other aspects of the Fresh Start program are:
- Greatly increasing the financial threshold for when tax liens are issued, resulting in far fewer liens
- Making it much easier to withdraw a lien, once the back taxes have been paid
- Withdrawing liens once an installment payment plan has been agreed upon
- Making installment plans more accessible to small businesses
- Expanding their offer in compromise program, to make it more accessible
Some Things To Keep In Mind When Considering IRS Negotiation
If you think you might consider negotiating with the IRS now or at some point in the future, here are a few points to keep in mind.
- Always File Your Tax Return – Whether or not you have the ability to pay all or even some of your taxes right now, you should always file your tax returns. This will help to reduce fines and fees, if nothing else.
- It just gets worse. Better to deal with it now. – Although it may take a while, the IRS WILL be coming for what’s owed to them. At first it may only be form letters, but the IRS gets more and more aggressive in collecting back taxes as time goes on and on, including wage and asset levies and garnishing wages. In addition, the back taxes begin to accumulate fees, penalties, and interest, as well as being severely damaging to your financial reputation.
How To Conduct An IRS Negotiation
In the instance that you feel you qualify for an installment plan or an offer in compromise, here’s how to go about an IRS negotiation.
- Let them know you plan to pay what is owed, in full, within 5 years time
- Offer a payment slightly higher than what you believe is expected of you
- Monthly payments are still eligible for existing IRS criteria, like subtracting household expenses from your total income
Once you have qualified for an installment plan or offer in compromise, make sure you follow up on your part of the bargain, in full, or face potentially dire consequences.
As with all aspects of tax law, IRS negotiation can be a very tricky and time consuming affair. A professional tax expert can be a major saving grace, in these instances, saving both valuable time and money, not to mention headaches, as well as offering a greater chance that your negotiations will be successful. Buyer beware, when seeing out a tax firm, however, as countless fly by night organizations popped up in the last decade, with so many Americans owing back taxes. Faulty or flawed legal representation can be worse than no representation at all.
To talk to one of our certified tax professionals, to find out how we can help with your IRS negotiation, contact us today!