What You Need to Know About IRS Tax Audits

Everything You Need to Know About Negotiating With the IRS Over Back Taxes

reviewed by Robin T Young
May 11, 2018

Are you stressed about negotiating with the IRS?

When you owe back taxes, it can be a challenging experience. You might be avoiding negotiation because you’re not sure where to start, or because you’re afraid of the repercussions. However, negotiating with the IRS is actually a good idea, and can make paying your back taxes much easier.

In this step-by-step guide, we’ll give you all the knowledge you need to approach your negotiations successfully. Keep reading to learn how to get your back taxes off your back.

Why Try Negotiating With the IRS?

Many people think of the IRS as a mysterious, intimidating, or even scary organization. However, the IRS has become more open to working with taxpayers to help get their back taxes paid than it used to be.3

However, to get the problem worked out, you’ll need to be straightforward and take action. If you follow these steps, negotiating with the IRS about your back taxes won’t be so intimidating.

1. File Your Tax Return

You might owe the IRS more money than you can pay at once. However, you still need to file your return, even if you know you won’t be able to pay.

If you file the return, you won’t have to pay as many penalties for not paying your taxes in full.

2. Don’t Delay on Getting Started

It’s always better to be proactive and tackle the issue up front. If you put it off, negotiating with the IRS will only become more challenging.

If you can’t pay your taxes yet, the IRS won’t come after you, especially if you’re straightforward about your situation. Their collection efforts often don’t start until months later. This can make it easy to put off tackling your taxes – but that’s never a good idea.

The first collection efforts will likely be simple letters that are generated by a computer. However, if you still don’t take steps to pay your taxes, the collection efforts become much more aggressive.

One of the most unpleasant of these efforts is the wage levies. The IRS will actually contact your employer and let them know that you are delinquent on your taxes, and that the wages paid to you must be paid to the IRS instead.

This can seriously damage your financial standing, not to mention your reputation at work. To prevent these issues, you’ll need to take action and start negotiating with the IRS right away.

Evaluate your tax situation

By evaluating your tax situation, you can identify areas where you may be able to reduce your tax burden and make informed decisions about your financial future.

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3. Set Up an Installment Agreement

Most of the time, the IRS is willing to work with you with an installment agreement or a compromise offer.

In an installment agreement, you’ll be required to pay the full amount you owe, but you’ll have a longer period of time in which to pay it. A compromise offer lets you pay a lump sum amount that’s less than the total amount of taxes that you owe.

Your financial situation usually affects which one of these the IRS will agree to. However, if you have enough money to pay the full amount, the IRS won’t allow an installment agreement or a compromise at all.

When you request your payment plan from the IRS, it’s best if you let them know that you plan to pay it all in five years – even better if you can pay it in two years.

4. Make Your Payments On Time

Once you’ve set up this kind of agreement, it’s important that you always make your payments when they’re due.

If you don’t make your payments on time, the IRS will actually take things that you own to pay your taxes. They can seize your bank accounts, and even your home mortgage, toward this end.

If you are having a hard time making your payments, you’ll need to contact them. Again, as long as you’re upfront about your situation, they’re usually willing to work with you. Just don’t wait until the last minute and have your missed payment come as a surprise – that’s why the IRS will usually take action against you.

5. Seek “Currently Not Collectible” Status

If you absolutely can’t pay your back taxes or anything toward them, you can try to get “currently not collectible” status. This can help you prevent things like property seizure and liens.

Currently not collectible status gives you a chance to give a proposed resolution for paying your taxes so you won’t have to lose your property in the process.

6. Keep an Eye on the Statute of Limitations

You may not realize it, but there actually is a statute of limitations on the IRS collecting back taxes. They have to collect any money owed in the 10 years following when the assessment was done.

There are sometimes strategies that can help you put off paying the full amount of taxes until after this date has passed. If you’re considering this option, it’s a good idea to speak to a tax attorney.

7. Get a Professional Representative

Even if you aren’t eyeing the statute of limitations, professional representation can still be helpful in many cases.

They can help in negotiating with the IRS to reach a compromise or agreement that works for both parties. However, you’ll need to be careful, as there are some scams out there.

Some firms seek to take your money while providing little or nothing in return. If you’re looking for representation, make sure to interview the representatives and check their credentials before you hire them.

Online reviews and conversations with former clients can go a long way toward making sure you’re hiring the right representation.

You should also make sure that your representative has prior experience in negotiating with the IRS. If they’ve only done tax preparation before, they may not be able to do much to help you.

Do You Need Help With Your Back Taxes?

Negotiations with the IRS may not sound fun, but sometimes, they’re necessary.

Looking for more help with your back taxes? Check out our guide to getting out of tax debt here.

Clinton F Wassor

Clinton F. Wasser, holding a Master of Science in Legal Studies of Taxation, brings a wealth of expertise in tax planning and compliance to his writing. With a career rooted in the workings of the tax landscape, Clinton navigates difficulties with finesse. Beyond his professional accomplishments, he generously volunteers his time to educate high school students about the nuances of taxes. As an author, Clinton marries his real-world experience with a passion for simplifying tax concepts. He has found that his technique empowers readers to better understand the world of taxation.
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