Can You Negotiate with the IRS on Back Taxes?

Tax Preparation Ohio

Tax season is generally a dreaded time in households across the country, but can be particularly stressful for those who still owe taxes from the previous year. According to the most recent data, Americans owed over $131 billion in interest, penalties, and back taxes in 2018. Fortunately, the IRS has been taking steps to make it easier for individuals to pay back taxes and get back on track. If you’re struggling to pay your yearly or back taxes, the Columbus tax attorneys at Sheppard Law Offices can help. Learn all about how you can lower your owed balance below. 

Can I Negotiate with the IRS on Back Taxes?

Contrary to popular belief, yes, you can negotiate with the IRS on back taxes. In fact, the IRS offers a variety of tax relief programs for individuals that are in trouble. There are several factors that can affect your tax relief eligibility, such as the amount of money you owe the IRS and your current financial standing. The first step to negotiating with the IRS is contacting a tax attorney. They work with you to explore your options and determine the best program to help you pay back what you owe. These options include:

  • Offer in Compromise
  • Installment Agreements
  • Penalty Abatement
  • Doubt as to Liability or Collectability
  • Audit Consideration
  • Amended Returns

While there’s no way to completely eliminate the debt owed to the IRS, these programs can be extremely helpful in reducing the amount owed or giving you additional time to pay it off. A tax attorney will walk you through each option to help you figure out the most effective way to deal with your back taxes. 

The IRS Fresh Start Program and Offer in Compromise

The IRS Fresh Start Program began in 2011 in an effort to help taxpayers and small businesses pay off back taxes. It has since been expanded to include the Offer in Compromise terms, to make it more accessible to financially distressed taxpayers. It is a way to help taxpayers pay for their tax liabilities and reduce the amount of owed taxes under certain circumstances. There are three main features of the Fresh Start Program that individuals can explore. 

Tax Lien

The Fresh Start Program is beneficial to taxpayers because it allows for a higher amount owed before a lien is implemented. A Tax Lien is a legal claim against the finances of a taxpayer or a business that has failed to pay its tax liabilities. With the Fresh Start Program, that amount is increased to $10,000, allowing individuals and businesses to owe more before incurring a lien. Taxpayers can also alter the way their tax lien is withdrawn by using the Direct Debit Installment agreement. 

Installment Payments

Another way to deal with back taxes is through installment payments to the IRS. The Fresh Start Program increases the amount owed to be eligible for installment payments from $25,000 to $50,000 and extends the qualified time frame from three years to six years. This widens the installment payment program’s eligibility to include more distressed taxpayers and businesses that are struggling. 

Offer in Compromise

An Offer in Compromise is an agreement between the IRS and the taxpayer that can settle an individual’s tax liability for less than the original amount owed. Generally, the Offer in Compromise is extremely difficult to get approved for, as the IRS will dismiss any OIC requests if they believe the taxpayer can pay the full amount in a lump sum or through installment payments. The IRS will evaluate the individual’s finances and determine whether or not they are capable of paying off their tax liability in full. 

How to Negotiate Your Back Taxes with the IRS

While the Fresh Start Program is extremely beneficial for taxpayers who owe back taxes to the government, there are several other steps you should take to reduce your tax liability and paw off your debts. The first consideration is to always file your taxes on time, even if you can’t afford to pay your entire tax liability at the time. That initial effort will prepare for future actions to help reduce your debt. Additionally, few things are more detrimental than ignoring your tax liability! Gather what information you can about your situation, and reach out to a tax attorney to help. They will work with you to negotiate terms with the IRS to help you fulfill your tax obligations over time. 

The Columbus Tax Attorneys at Sheppard Law Offices

Whether you cannot pay your current taxes or have been putting off paying previous debts, the Columbus tax attorneys at Sheppard Law Offices can help. We work with you to determine exactly how much you owe and your options to pay it back. We negotiate with the IRS to lower tax liability, reduce penalties, and establish a comprehensive plan to handle your back taxes. Contact us today to learn more.