What is a Tax Debt Negotiation and How Does it Work?
If you owe money to the IRS, there are settlement and payment options available to help you navigate the situation. These are usually considered if you’re experiencing financial hardships that make it challenging for you to pay your debts on time.
The IRS also has a Fresh Start program that can help you through the process of tax debt negotiation.
Read the rest of this article to learn about tax debt negotiation, how the Fresh Start program can assist you, and when to consult with a lawyer for help with handling tax debts.
What is the IRS Fresh Start Program?
The IRS Fresh Start program is a list of payment plans offered by the IRS to help taxpayers settle their debts. It includes debt-relief programs such as the following:
- Offer in Compromise (OIC). This is when you pay a settlement that’s less than what you owe but still gives the IRS some or most of the amount owing.
- Installment Agreements. This is when you agree to pay off the debt over a certain number of months, which can serve to make the debt a bit more affordable.
- Currently Not Collectible (CNC). The IRS can temporarily stop debt collection. If you’re going through severe hardship, this could be a solution to help you.
- Penalty Abatement. By removing or lowering the penalty costs included in your debt, you can make settlement more affordable.
The Fresh Start program doesn’t mean that your IRS debts will be written off. Instead, this program’s solutions strive to help taxpayers to meet their tax obligations and reduce the amounts they owe to help them afford their taxes.
By making use of the above solutions, you’ll start managing your finances in an effective, legal way without worrying about possible IRS enforcement actions.
How Does Tax Debt Negotiation Work with the IRS?
If you’re interested in the IRS’s Fresh Start program to help you with your tax debts, the process of gaining approval usually works in the following ways.
You Must File Your Returns
You need to show the IRS that you’re compliant by filing your tax returns on time. This is usually an important criteria you must meet before you can be considered for a tax-relief program.
You’ll Get in Touch with IRS
Whether by calling them or messaging them via their website, you’ll reach out to the IRS and explain that you need assistance. Or, you’ll just fill out a form related to the financial solution you’d like to make use of and submit it to the IRS for consideration.
The IRS Considers Your Case and Decides
The IRS will assess your specific case, taking your expenses, assets, and income into account. This will help them see how much you can realistically afford to pay for your debts, guiding their decision to either accept or reject your application.
Do You Qualify for the Fresh Start Program?
If you want to make use of a debt-relief program offered by the IRS, you will have to ensure you qualify for it. Knowing these criteria before you apply for assistance can increase your chances of being approved.
Your Debts Must Not Exceed Certain Thresholds
Some IRS programs have eligibility thresholds, such as $50,000 or $250,000. You might still be eligible for debt relief if your debts exceed these amounts, but you’ll have to provide additional documentation.
You Need to Be Assessed for Financial Hardship
The IRS will check if paying the full tax debt you owe would cause you to struggle financially, such as if you don’t have access to credit to help you. This could encourage them to offer debt-relief programs such as Currently Not Collectible (CNC).
Your Payment History will Be Considered
The IRS will likely consider your payment history with them before approving your application. If you have a history of missing tax payments or you’ve been penalized for evasion, this could hamper your chances. While you should still try to get debt relief, it’s worth knowing that the IRS will take your history into account.
How Can You Have Successful Tax Debt Negotiations?
Although you need to meet certain criteria for gaining tax debt relief from the IRS, there are some actions you can take to increase your chance of approval. These include the following:
- Research the available options. Make sure you choose the best debt-relief option that works for your financial situation so that you can afford to make payments.
- Gather financial documents. These will be used to support your case and show proof of your financial hardship.
- Hire a tax attorney. Although you can negotiate with the IRS directly, such as by chatting to them on the phone, hiring a tax attorney can help you improve your outcomes.
Do You Need Legal Assistance with Tax Debt Negotiations?
While you can apply for debt-relief programs offered by the IRS on your own, such as by using their channels for submitting forms, it can be beneficial to work with a qualified tax lawyer, especially in complex situations or if you suspect your application will be denied.
A lawyer can help you in various ways, such as by:
- Helping you choose the best tax debt-relief program to meet your ability to pay off the debts.
- Preparing your financial documents and disclosures so you provide what’s typically required.
- Negotiating on your behalf with the IRS officer.
- Guiding you with submitting all required application forms.
- Assessing your specific tax debt situation to help you gain favorable, legal relief.
Where Can You Hire a Lawyer for a Tax Debt Negotiation?
If you want to make use of the IRS’s Fresh Start program to help you with your tax debts, you might want legal guidance. Hire a lawyer on ContractsCounsel, an online legal marketplace that connects clients with experienced, vetted lawyers. You can select the best lawyer for your needs based on factors such as their location, expertise, and client ratings. With their blend of experience and skill, they’ll guide you through the tax debt negotiation process with ease.
