February 22, 2017

Denver Tax Attorney   Negotiating Back Taxes with the IRSOver the last few years, the Internal Revenue Service has been more agreeable to installment agreements and other ways of working out late tax payments. Not everyone, though, can negotiate with the IRS. The IRS can be selective as to which debt they will negotiate, and so a taxpayer must meet certain criteria to be considered as a candidate for tax negotiation.

When it comes to collecting your back taxes through collection actions, the agency may consider settling if you can establish that you have a poor financial situation. The two most common methods for negotiating taxes in these cases are the partial payment installment agreement and the offer in compromise.

A partial payment installment agreement allows you to pay back the taxes you owe to the IRS through monthly installments over an extended period of time. The total amount to be paid is generally less than the total amount owed. To qualify for this type of installment agreement, you must not be able to meet the monthly payments required of the normal installment agreement.

The installment agreement is the preferred method of the IRS for taxpayers to pay off their tax debt. Taxpayers are deemed to be in good standing with the IRS if their monthly payments are made on time and in full.

An offer in compromise enables you to make an offer for an amount either equal to or greater than the IRS would expect to receive or collect from you—with the offer amount generally only a portion of what is actually owed. Though the IRS rarely accepts applications for offer in compromise, you may possibly be accepted if you truly cannot pay.

If you owe the IRS a hefty amount in back taxes, a large portion of the amount owed is comprised of interest and penalties. However, the IRS realizes that you may have a reasonable or valid excuse for not filing or paying your taxes on time. If so, the IRS may agree to reduce or eliminate these penalties if you file for Penalty Abatement.

If you are neither facing financial hardships nor have a legitimate reason for filing or paying your taxes late, then you may have difficult time negotiating back taxes with the IRS. It would be best to consult with a tax professional who can help you identify other available alternatives for resolving problems with the IRS.

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