Negotiating with the IRS: How to Settle Your Tax Debt
Unpaid taxes may be a big source of worry and concern knowing that you have choices for settling the problem is crucial. One option is to negotiate a debt settlement with the IRS. The process of negotiating with the IRS and tax debt settlement is explained in detail.
Step 1: Review Your Tax Returns
If you have unfiled returns, file them before beginning negotiations. The IRS will not consider a settlement offer if you have unfiled tax returns.
Step 2: Gather Information on Your Financial Situation
You’ll need to submit a complete picture of your financial status to bargain with the IRS. This contains details on your earnings, spending, possessions, and debts. You will be more prepared to bargain if you have more information.
Step 3: Choose a Negotiation Strategy
Choose the best negotiating strategy that suits you depending on your unique situation. Here are some common strategies:
- Offer in Compromise
- Installment Agreement
- Currently Not Collectible
Offer in Compromise
The strategy involves making an offer to the IRS to settle your debt for less than the full amount owed unpaid taxes may be a big source of worry and concern. You must demonstrate a financial hardship before receiving an Offer in Compromise to qualify. You must demonstrate a financial hardship before receiving an Offer in Compromise to qualify.
It involves setting up a payment plan with the IRS to pay off your debt over time. The IRS may be willing to accept a lower monthly payment than what you currently owe.
Currently Not Collectible
It is used for taxpayers who are experiencing financial hardship and cannot afford to make payments on their tax debt settlement. If the IRS deems you Currently Not Collectible, they will temporarily stop collection activities.
Step 4: Negotiate with the IRS
Be honest when describing your ability to pay and be ready to present proof of your financial condition.
If you are negotiating an Offer in Compromise, be prepared to provide a detailed explanation of why paying the full amount owed would cause financial hardship. You should be prepared to present proof of your earnings, outgoings, possessions, and obligations.
If you are negotiating an Installment Agreement, be prepared to offer a monthly payment that you can afford. The IRS may ask for financial information to verify your ability to pay.
Step 5: Work with a Professional
The IRS may be difficult and time-consuming to negotiate with. Working with a tax expert can simplify the procedure and improve your chances of success. A professional can help you choose the right strategy, prepare your financial information, and negotiate with the IRS on your behalf.