How do you negotiate a settlement for owed federal taxes?

Answer 1

The IRS has a major initiative, called the offer in compromise , to do just such a thing. Unfortunately, while it is getting a lot of fanfare, the results may not be as great as everyone hoped for. Nonethless, it establishes the format and paramters to get an agreement...and with someplace like the IRS, you'll likely find that once there is a process, you'll have problems having anyone do it any other way. If taxpayers are unable to pay a tax debt in full and an installment agreement is not an option, they may be able to take advantage of an offer in compromise (OIC). Generally, an OIC should be viewed as a last resort after taxpayers have explored all other available payment options. The IRS resolves less than one percent of all balance due accounts through the OIC program. But, that might not be as bad as it sounds when you consider the huge number of balance due accounts they handle, only a very small number ever even try to get an OIC! What is an Offer in Compromise? An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment under certain circumstances. A tax debt can be legally compromised for one of the following reasons: * Doubt as to liability - Doubt exists that the assessed tax is correct. * Doubt as to collectibility - Doubt exists that the taxpayer could ever pay the full amount of tax owed. * Effective Tax Administration - There is no doubt the tax is correct and could be collected but an exceptional circumstance exists that allows the IRS to consider a taxpayer's OIC. To be eligible for a compromise on this basis, the taxpayer must demonstrate that collection of the tax would create an economic hardship or would be unfair and inequitable. Make sure you make your case/story qualify as one of the above, or they won't be authorized to make a compromise. I'll provide a link on how to self file one. Good luck!