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Reliable Advice for Negotiating an IRS Back Tax Settlement

An IRS back tax settlement offers tax debt settlement if certain criteria are met. Hutton Tax Solutions helps in finding solutions to qualify and reduce the tax owed.

How Do You Get an IRS Tax Debt Settlement?

The Internal Revenue Service (IRS) is an American federal agency that collects taxes from US citizens and businesses. It is responsible for the implementation and administration of tax policy. Generally, a person spends little effort considering their tax liability. They merely fill in the appropriate forms and submit them when required to. Occasionally, however, the IRS will inform them that their calculations are wrong and will send them a tax collection information statement.

If you have undergone a recent change in circumstances, sometimes, the IRS offers to settle the debt with an offer in compromise or by accepting installments based on your income.

If you face financial hardship and seek a tax settlement with a reasonable payment plan or wish to dispute your IRS tax debt, a tax professional from Hutton Tax Solutions can help you to settle your tax debt.

What Is an IRS Back Taxes Settlement?

IRS back taxes settlements are a way for the government to collect money owed to it by the taxpayer. The IRS will work with taxpayers to negotiate a settlement to collect any money that is owed.

Is There a One-Time Tax Forgiveness?

In some situations, a tax debt can be forgiven. Despite the agency’s reputation, the IRS often works with taxpayers in disadvantageous circumstances to help them handle their tax burdens.

It is possible to have a federal income tax debt forgiven if you are suffering from a physical or mental impairment (or you care for someone with an impairment), or if your income is very low.

The IRS will also consider granting relief to taxpayers who cannot pay their tax liability due to a recent disaster, such as a COVID layoff or Hurricane Katrina. You may need to supply detailed information including your current income for your IRS tax debt to be forgiven.

The IRS may also offer one-time debt forgiveness to first-time offenders under the umbrella of the Fresh Start Initiative. In order to qualify for IRS one-time forgiveness, a taxpayer must have a clear record of accurate and timely tax filing to qualify.

IRS Tax Settlement Programs

The Internal Revenue Service offers a variety of programs to help taxpayers who are unable to pay their tax debt, including these two main programs:

  1. Offer in Compromise (OIC): This program is for those who cannot afford to pay the full amount of their tax debt. It is also for those who don’t want to go through bankruptcy and can’t afford a repayment plan.
  2. Installment Agreement: This program is for taxpayers who can make monthly payments on their tax debt.

Both programs allow you to set up a payment agreement that fits your budget and they provide some relief from penalties and interest charges.

What Is Offer in Compromise?

The IRS will, in some cases, allow a settlement that involves the taxpayer paying less than the full amount owed with an Offer in Compromise (OIC). However, the taxpayer has to convince the IRS that they can’t afford to pay the amount they owe and that they have to pay a reduced amount instead, either in a lump sum or in monthly installments. The IRS has a tool called the Offer in Compromise Pre-Qualifier tool taxpayers can use to check whether they are eligible and prepare a preliminary proposal. Taxpayers who can afford to pay the liabilities in full by any means generally won’t qualify for an Offer in Compromise.

Also, to qualify, the taxpayer must have made all required estimated tax payments for the current year. If the taxpayer is a business owner and has employees, they must have paid all required federal tax deposits for the two preceding and the current quarter.

What Is an Installment Agreement?

If the taxpayer cannot pay what they owe by the original filing due date, they may qualify for additional time, up to 180 days, to pay their tax debt in full. If that appears to be too short, you may qualify for a monthly payment plan, including an installment agreement. Bear in mind that if you owe money to the IRS, the balance is subject to monthly late payment penalties and interest. Failure to file a tax return can also result in a penalty.

If the taxpayer does not agree with the offer, they can choose to go through litigation instead. This means that the government will take them to court and try and get a judgment against them for them to pay back the IRS tax they owe.

How to Negotiate Back Taxes with IRS

The IRS has several ways to collect taxes, and they can be aggressive in their collection efforts. If you are unable to pay your tax debt, then you need to contact the IRS and discuss your options.

If you owe more than $25,000 in tax debt, then you may be eligible for an installment agreement with the IRS. You will need to fill out Form 433-F and submit it along with a signed Form 433-D and a financial statement including your bank account. If you have any questions about your tax debt or a payment plan, then contact the IRS at 800-829-1040.

For additional IRS Tax Help, contact attorneys from Hutton Tax Solutions.

How Much Will the IRS Usually Settle For?

When the IRS decides to settle with you, they will usually calculate the amount owed based on previous settlements. This is a tactic used to encourage people to agree to their settlement terms, as it could lead them to owe more money if they don’t.

If you don’t owe as much as prior tax returns indicate, by negotiating your tax case, you may be able to avoid the following:

  • High monthly expenses
  • Lump-sum payment
  • Tax lien

Do You Need a Lawyer to Negotiate with the IRS?

Owing money to the IRS can be terrifying. But don’t forget that you have the right to be represented by a tax pro when negotiating how to resolve your tax debt. A lawyer, attorney, or tax professional who is experienced in helping a taxpayer settle their tax bill can significantly impact your odds of reaching a favorable agreement with the IRS. Tax lawyers are better equipped to handle these tax matters and ensure both the taxpayer and the IRS are satisfied.

A reputable tax attorney can outline your options and help you determine the right path for you. You may be able to settle your tax debt for less than the full payment. Offers in compromise programs are merely one of the solutions the right attorney will present to you.

Is the IRS Collecting Back Taxes?

The IRS is a government agency that collects taxes from individuals and businesses. The IRS is not collecting back taxes; the Department of Revenue does. The IRS has been able to collect billions of dollars in revenue.

If you have back taxes and seek a settlement, consulting an experienced tax resolution firm is a sound first step. They may be able to arrange for you to make monthly installments of your tax payments to decrease your IRS tax debt.

 

How to Report a Settlement on Tax Return

 

The IRS won’t automatically know that you have settled a tax matter, so it’s your responsibility to report it. The settlement of a tax matter is not considered taxable income. You should report the settlement on your return as a reduction in the tax you owe.