Can back taxes be negotiated?

A transaction offer allows you to pay off your tax debt for less than the full amount you owe. It can be a legitimate option if you can't pay your full tax liability or if doing so creates financial difficulties. You CAN negotiate your back taxes with the IRS. You can't get rid of them, but you can agree on an equitable, reasonable, or possible way to settle them.

The worst thing you can do right now is ignore everything, hoping that the problem will go away. The IRS has the authority to cancel all or part of your tax debt and reach an agreement with you for less than you owe. This is called a compromise offer or OCI. Just because you owe back taxes doesn't mean you can negotiate or settle liability.

Each person's financial situation will be analyzed to determine eligibility for a tax settlement under a commitment offering program, including assets, income, and living expenses. Working with a professional will increase your chances of getting an agreement approved with the IRS than requesting it on your own. There is an acceptance rate lower than 25% for tax settlements. If you owe a significant amount in back taxes and can't repay the full amount, making a commitment offer to the Internal Revenue Service (IRS) could be your best course of action.

If you can't financially commit to paying your back taxes, a temporary solution is to apply for “currently uncollectible” status with the IRS. If you qualify, your tax advisor can determine how much your offer amount should be and deal with the IRS to get you to apply for an OIC. This is offered to people who can demonstrate a justifiable reason for not filing or paying their taxes on time. If your financial situation is so bad that paying the taxes due would make it impossible for you to recover, the IRS will consider a tax settlement.

Tax lawyer Beverly Winstead says there are many aspects of negotiating with the IRS that you can do yourself, but there are some situations where a professional can help you. Dealing with back sales taxes can be a stressful situation, but chances are you won't have as much trouble as you initially seem. Solvable is a for-profit company that helps customers solve their tax problems, but it is a free service for consumers. The program also made it easier for taxpayers to obtain a withholding tax withdrawal after paying their tax bills.

According to Winstead, some of the IRS notices will alert you to the taxes you owe; if you ignore them for too long, you may receive notices that say they plan to garnish your account. But ignoring the problem won't make it go away; be prepared with information so you can contact the IRS yourself or get help from a tax professional. A partial installment agreement is a payment plan with smaller payments than the regular installment plan offered by the IRS and, generally, the statute of limitations for the tax liability is reached before the full amount is collected, meaning that the rest of the balance is no longer due. Perhaps the most common scenario that leads to back taxes on commercial sales is the filing of inaccurate revenue reports.

The first step in making a transaction offer is to make sure you're up to date with your tax returns. If you still don't pay your taxes, the IRS has some fun little tools to make your life unpleasant until you pay. If that's the case, don't despair; there are several ways to negotiate with the Internal Revenue Service (IRS) to help you resolve your taxes.