Negotiating tax debt

92150129_MOwing Internal Revenue Service (IRS) is intimidating to many people – why shouldn’t it be? Uncle Sam has the power to seize your assets, garnish your wages, and place a lien on your property just to collect their money. However, in the past few years, the IRS has been tractable to working out late tax payments to ease the burden. But you must not keep Uncle Sam waiting; you have to be proactive in addressing the issue upfront.

Fortunately, the IRS will sometimes work a deal with those that their inability to pay stems from their lack of money and not because they were negligent or trying to evade payment. This post will explore some major options that the IRS offers. By understanding what these strategies entail, you can choose one that works best for you.

IRS Fresh Start Program

The IRS initiated its Fresh Start program back in 2011 to give late payers a path to paying off their tax liabilities. Here are some of the notable changes that were made:

Significantly raising the dollar threshold for the issuance of liens. This, in turn, keeps tax liens low.

Easing the process of obtaining lien withdrawals after outstanding tax payment.

Withdrawing liens after a Direct Debit Installment Agreement is reached with a taxpayer.

Making it easier for struggling small businesses to access installment agreements.

Making Offer in Compromise program accessible to more taxpayers.

The Golden Rule – Always File Your Return

Whether you can pay your tax or not before Tax Day (April 15), ensure that your file your tax return. Failure to do so will result in the accumulation of penalties that will cause you to pay significantly more than you would have if you had filed it.

There’s no running away with the IRS’s money. They are patient and have the backing of the U.S. government. Although collection efforts might start as benign, it later devolves to more aggressive tactics that can cripple you financially.

Options For Late Tax Payers

There are several deals that you can negotiate with the IRS to help you pay your taxes. The most common ones include:

Installment Agreement

This deal functions just like a mortgage but you’re making monthly payments to the IRS rather than your lender.

To qualify for this plan, you must satisfy certain requirements, including:

  • Your tax returns are up-to-date
  • You’ve mostly paid your late fees and state income taxes
  • You can meet up to the monthly minimum payment set by the IRS

Meeting these requirements is important because the IRS avoids reaching an installment agreement with people that won’t be able to make the monthly payments. Moreover, the IRS won’t deal if you owe over $50,000 in arrears.

If the debt criteria are met, the IRS uses a formula to arrive at a monthly payment. It is advisable to consult with a certified tax resolution specialist or tax debt attorney to review your options and help negotiate with the IRS on your behalf.

Remember that even after a payment plan is agreed upon, interest and penalties accrue until the back-tax balance is fully paid.

Offer in Compromise

The IRS sometimes consider a settlement where you pay a reduced amount of what you owe in back taxes. This plan is referred to as ‘Offer in Compromise”. You must convince the IRS that you cannot afford to pay the full sum, rather you can pay a reduced amount in a lump sum or short-term installments.

You should be wary of TV ads that promise to help you to pay pennies on the dollar to the IRS. They’re mostly misleading. Just filing for an offer in compromise form costs $186. in the form, you are to enter details about your income, spending habits, assets, and investments. The IRS uses this information to evaluate your ability to pay.

In the case of short-term installments, the IRS determines your net worth, income, and other sources of credit to estimate how much you can afford to pay monthly. If a compromise agreement is reached, you will have two years to settle your tax debt.

Currently Not Collectible

For people going through financial hardship and cannot afford to squeeze out tax payments from their current income, the IRS can put tax collection on hold, labeling it ‘currently not collectible’. Of course, this is a temporary status and the IRS will let you know when you are expected to pay. The benefit of this plan is that it puts a hold on tax levies, wage garnishments, and liens on your property.

Release Wage Garnishments

When you owe the IRS, they can levy your salary, wages, or federal payments until your tax debt is paid in full or the legal time for collection is exceeded. If you cannot survive with the levy in place, there’s room to bargain for a release or modification to the garnishment to ease the financial burden.

Innocent Spouse Relief

If you file a joint tax return with your spouse, even if you’re legally separated, you can be held liable for underpayment. However, if you can prove that your spouse or former spouse hid a tax liability from you, you can be exonerated. Under the innocent spouse relief, you must show that your spouse misled you either by not reporting income or by taking deductions that weren’t permitted.


Income tax debt may be eligible for discharge under Chapter 7 and Chapter 13 of the Bankruptcy Code. Although filing for bankruptcy is a way for Tax Debt Relief, you should only consider doing so if you meet the requirement for discharging your tax, some of which include:

  • The taxes in question are income taxes.
  • The debt is, at least, 3 years old.
  • You filed a tax return, at least, 2 years before filing for bankruptcy.
  • The debt was assessed by the IRS, at least, 2040 before filing for bankruptcy.

Under Chapter 7, a full discharge of allowable debts is possible. Under Chapter 13, a repayment plan for part of the debt is agreed upon while the remaining debt is discharged.

Stick To Payments

Ensure that you do not default on your payment plan or agreement. This may result in the IRS seizing your property, bank accounts, or putting a lien on your house.

In a situation where you cannot meet up to the agreement, speak to the IRS to work through it. When dealing with the IRS, being upfront is key.

Get Professional Help

Navigating the process of negotiating tax debt with the IRS can be quite challenging. If your debt is less than $10,000, it’s best to contact the IRS on your own and work out a plan. If your debt is between $10,000 and $25,000, seek the advice of a lawyer or tax pro. If it’s more than $25,000, getting a professional to help in negotiating your tax debt with the IRS is typically the best course of action.


You should never mistake the flexibility of the IRS for weakness. These programs exist so that late taxpayers can get back on track with the taxes. It, however, depends on you being proactive in coming to a resolution with the IRS soonest. Reach us today for more information!

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