How to Negotiate Taxes with the IRS

Are you behind on your taxes, worried that the letters are getting more threatening and the penalties are mounting, paying more attention to the tax relief ads on TV, losing sleep at night? It may be time to talk with the IRS.

A taxpayer must meet one of two basic requirements to be able to negotiate with the IRS. To qualify you must be able to prove financial conditions such that you cannot pay your obligations in full or that you have a reasonable reason for not filing or filing late.

If you qualify under either of these scenarios consider the following insights on what to expect when negotiating with the IRS.

Poor Financial Situation
If you believe you qualify under the poor financial situation qualification there are two common strategies to consider when making a proposal to settle your account:

1. Compromise Settlement - Formally called an Offer in Compromise this is a filing that allows the taxpayer to make an offer to the IRS for an amount that approximates what IRS could reasonably anticipate collecting from you. This is rarely accepted by the IRS except from people who truly cannot pay.

2. Full Payment Under An Installment Agreement - If you can get your penalties and interest waived, you may be able to reach an agreement by which you would repay the actual tax liability in monthly installments. This makes catching up with the IRS financial more bearable but does not actually reduce the liability.

Reasonable or Legitimate Reason
If you were out of the country, incapacitated or otherwise prevented from filing promptly you may have a reasonable argument as to why you were late and can request consideration. Penalties and interest for not filing promptly or failure to pay your taxes on time are substantial. If you have a legitimate excuse for not filing on time or being unable to pay your taxes when due you may be able to get waivers of the penalties and taxes.

These penalties are a scare tactic to encourage prompt payment. The penalties and interest can be waived if you have a legitimate reason. If so, you may request either or both be waived.

Be Proactive - Don't Ignore the Problem
What you do not want to do is ignore the situation. You will eventually have to work things out with the IRS. The longer you wait the greater the penalties, the more the interest, and the less likely you will find an auditor or IRS agent willing to consider your pleas.

Get Help
Once you decide to file either a reduction in taxes or request for waiver of penalties and/or interest make sure you find out precisely what you have to do to file. Errors in the filings are probably the biggest reason for rejection of the requests.

There are times when getting help makes sense. Negotiating with the IRS may be one of those times. The intent of the penalties, process, and forms is to intimidate you, the taxpayer. Enlisting someone to help you through the process is a good idea to lower your anxiety and accelerate the process if for no other reason than the fact that they know the process.

If your problem is large enough to warrant getting help make sure you get a qualified professional to assist you.