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How to Make a Deal with the IRS

Monday, December 10, 2012

You may see the ads on television or on the internet promising you that they can settle your tax debt for “pennies on the dollar” and quote some ridiculous results.  While these are not realistic, you can make a deal with the IRS for less than what you owe.

The IRS is backlogged on Offers in Compromise requests, which means it may take them longer to review one if you submit it to them.  An Offer in Compromise is an option for people with a tax liability to request that the IRS settle the tax debt for an amount less than what they owe.

Simpler Terms

Changes in the Offer in Compromise requirements have made it easier for more people to request such terms.  This coupled with the fact that more people have less money than they did before the economic downturn have increased the collections made by the IRS and the requests for assistance made by the taxpayers.

The IRS is working to get more people to pay their taxes even if it means a reduced amount.  This lessens the burden on both the taxpayer and the IRS who must fund those efforts.  There are three basic ways to handle a tax debt with the IRS.

·         Enter into an installment agreement, where you will pay the full amount but over a period of time.

·         File for an Offer in Compromise where you will pay less than the full amount owed.

·         Request that the IRS back off for a year or two to allow you to get your finances in order by being declared currently non-collectible.

The method you choose will depend on your particular situation, how much you owe, and how long the statute of limitations is for your tax liability.  If you decide to pursue the Offer in Compromise, you will need to complete Form 656 and figure your budget based on approved expenses by the IRS for how much should be spent on one particular expense.

If your situation is that you truly cannot pay the total amount, you may be better off with a payment agreement over a reduction in total amount owed.  You can negotiate payments that are affordable and fit in with your budget.  It is often helpful to work with a tax professional who knows what amount is likely going to be approved by the IRS and who can help you file the proper paperwork correctly.

The attorneys for Strategic Tax Lawyers can assist you in filing paperwork or making the right decision about which method to pursue.  They can look at your case and provide valuable guidance to get you out of debt with the IRS as quickly as possible. 

While more people are filing for an Offer in Compromise and rules have been relaxed to help taxpayers, a majority are still turned down.  The right professional can improve your chances of being approved or advise you against the action and steer you towards a better option.

IRS Resources

The IRS.gov is a good place to start for current references on tax law.  You can also contact the IRS with specific questions based on your own unique situation.  Search and download online IRS forms and publications.   Visit the Department of Labor for guidance on employment law; or head to Google to search a targeted keyword and get general answers on certain areas of tax law.  Here’s a link to the Beverly Hills Bar Association as well.