What is IRS Debt Negotiation?
If you owe the IRS debts you can’t afford, you might not realize that you could be able to negotiate them. IRS negotiation involves formulating a payment plan that enables you to settle your tax debts in a more affordable way. This can include lowering the total amount that’s owing or organizing a longer payment plan.
Read the rest of this article to learn about IRS debt negotiation in more detail, how it works, and when you should consult with a lawyer for assistance with your debts.
What are Your Options for IRS Debt Negotiation?
Usually, there are four options that can provide relief for your IRS debt. These are:
- Offer in Compromise (OIC). This lets you settle your liability for less than the amount owing. In order to use this option, the IRS will take your income and assets into consideration to decide on how much you’ll be able to pay.
- Installment Agreement. If you’re struggling to make payments on your debt, you might be able to start a monthly payment plan that settles the debt over time in a more affordable way.
- Currently Not Collectible (CNC). If your financial hardships are intense and you can’t pay anything toward the debt right now, you might be able to ask the IRS to delay the debt collection temporarily until your situation improves.
- Penalty Abatement. This is when you ask to remove penalties associated with the debt. While it doesn’t remove the amount of debt you owe, it can reduce your costs.
Do You Qualify for IRS Debt Negotiation?
Before making an offer to settle your debt with the IRS, you will have to ensure that you qualify for the assistance. Here is a brief rundown of what they will consider for each of the debt negotiation options listed in the previous section.
Offer in Compromise (OIC)
Not every taxpayer will qualify for an OIC. You must meet the following criteria:
- You’ve filed all your tax returns.
- You aren’t bankrupt.
- You have a bill for a minimum of one tax debt included in your offer.
Once you’ve met these criteria, the IRS will agree to an OIC if you meet any of the following:
- You don’t owe the tax.
- You can’t pay all the debt you owe.
- Should you pay the debt, it would cause financial hardship for you.
You also have to fill out an application form, known as Form 656 and pay an accompanying fee. You’ll have to submit Form 433-A for individuals or Form 433-B for businesses, and provide financial information. The IRS will then review your submission and either accept or reject your offer.
Installment Agreements
If you can’t pay the full amount owing on the debt, you can pay monthly via this arrangement. There are short-term plans that last up to six months or longer plans that have additional costs, such as setup fees.
As long as you’ve filed your tax returns, you will likely qualify for an installment agreement. Go to the IRS website to set one up online.
Currently Not Collectible (CNC)
Should you need to temporarily pause your bill payments because you can’t afford basics like food, you can request a CNC status. You will have to contact the IRS and prove that you can’t afford essentials, such as your rent or medical care. They will assess your financial situation before delivering a decision.
Penalty Abatement
This plan won’t decrease the amount you owe the IRS, but it can reduce or write off penalties to help you save money on the overall amount. As long as you have a good tax record for the previous three years, the IRS can waive penalties for one tax period.
If you have a strong reason for not having paid your taxes, such as a death in the family or illness, the IRS will also consider this.
What are Tips for Negotiating Your IRS Debt?
You have the option of working with the IRS to negotiate a debt settlement, but this might not be a negotiation in the traditional sense of making offers and counteroffers. The IRS will take your situation into account so you’ll have to leave the final decision up to them.
If you’re going to negotiate with the IRS for your debt, you need to ensure you do the following that will help your case.
- Gather all your documents. Make sure you have all the relevant documents you need based on the tax relief you wish to gain. This can include financial statements and other records to show proof of your hardship. Have all your records on hand before you call the IRS.
- Visit the IRS website. As part of preparing before you contact the IRS, you should visit the IRS website to read up on any advice and download any forms you might need.
- File Your Taxes. Even if you can’t pay your debt, it’s worth continuing to file your taxes. This keeps you in good standing and helps you to avoid paying extra fees or penalties.
Do You Need Legal Assistance with Negotiating Your IRS Debt?
It’s advisable to work with a tax professional to deal with your IRS debt. You can also benefit from working with a lawyer who can help you find the best solution for your financial situation and hardship.
A tax lawyer can also assist you to avoid severe consequences related to the debt, such as wage garnishment.
Although working with the IRS can feel stressful or overwhelming, working with a qualified legal professional can give you peace of mind that you’re navigating the situation in the best way possible and exploring all your legal options.
Get Help With Your IRS Debt Negotiation
If you’re struggling to make your tax payments, you can work with a qualified lawyer on ContractsCounsel. As one of the largest online legal marketplaces, with over 1,000 vetted lawyers on its platform, ContractsCounsel provides you with skilled lawyers who have experience in assisting clients with their IRS debt. You can select the best lawyer for your needs based on factors such as their location, expertise, and client ratings.
