Tax Blog

Settling with the IRS

Can You Settle with the IRS?

Remember when we all thought it was impossible to put a man on the moon? Well, we did it. And now, I’m going to show you how settling with the IRS (Internal Revenue Service) is not only possible but can be as manageable as planning a lunar mission (with the right guidance, of course).

As a tax attorney with two decades of experience under my belt, I’ve had countless clients come to me, wringing their hands over their IRS debt, thinking they’re at the mercy of this federal agency. Let’s debunk that myth right now: you can settle with the IRS, and it’s not as daunting as you might think.

The IRS Payment Plan

The IRS, contrary to popular belief, doesn’t want to make your life miserable. They simply want the money they’re owed, and they’re willing to work with taxpayers to get it. This is where the IRS Payment Plan comes in.

The IRS Payment Plan is essentially a monthly payment agreement between you and the IRS. It’s the installment plan of the tax world.

The Payment Plan is particularly handy for those who cannot pay their tax debt in one lump sum (and let’s face it, who can?). It’s a lifesaver when you’re drowning in IRS debt and need to surface for air.

The IRS Fresh Start Program

If your tax debt was a book, the IRS Fresh Start program would be the plot twist you didn’t see coming. Launched in 2008, the Fresh Start initiative was designed to give beleaguered taxpayers a proverbial do-over.

The program includes revamped provisions for Installment Agreements, Tax Liens, and perhaps most appealingly, the Offer in Compromise. In essence, it’s the IRS’s way of saying, “Let’s turn a new page.”

Offer in Compromise (OIC)

The Offer in Compromise (OIC) is the gallant knight in shining armor of the tax world. It’s your opportunity to say to the IRS, “Look, this is what I can reasonably pay. Can we call it square?”

An OIC allows you to settle your tax debts for less than the full amount you owe. Some ads call it “Pennies on the Dollars,” but I don’t like that term as it oversimplifies the process. It might sound too good to be true, but the IRS isn’t a fire-breathing dragon. They prefer some treasure rather than chasing after all of it.

But remember, the knight must prove his worth. The IRS evaluates your ability to pay, income, expenses, and asset equity. It’s like a jousting tournament where the knight must prove his worth to the king.

Tax Debt Relief 

What’s that in the distance? It’s tax debt relief, the twinkling lighthouse guiding you out of the stormy seas of IRS debt.

Settlement, in the form of an OIC or Payment Plan, is a form of tax debt relief. But there are better options. Other avenues include penalty abatement (getting the IRS to forgive some of your penalties), bankruptcy (a drastic move with its own set of challenges), or changing the collectible status and having the statute of limitations expire on your debt (it’s a long waiting game).

In the End: Settling with the IRS

So, there you have it: a roadmap to settling with the IRS. And guess what? It doesn’t involve quicksand, falling boulders, or a Minotaur. It requires planning, patience, and perhaps some professional help.

Settling with the IRS isn’t a pipe dream—it’s a viable option for taxpayers overwhelmed by debt. If you arm yourself with the right information and a can-do attitude, you can negotiate a fair settlement with the IRS.

Remember, the goal isn’t to defeat the IRS; it’s to find a win-win solution that keeps you financially afloat. So, put on your space suit, buckle up, and get ready for your moonshot: settling with the IRS. Here’s to your tax triumph.

Call Us Today to Discuss IRS Relief Programs

Are you feeling like a lone astronaut navigating the abyss of tax debt? Don’t go it alone. Remember, even Neil Armstrong had his team at Mission Control. Reach out to us, The Tax Defenders, at 312-345-5440. Our team of experienced tax professionals is ready to help you launch a successful mission to settle with the IRS. With two decades of experience helping clients just like you, we’re more than equipped to guide you through the IRS relief programs and help you land safely back on your financial feet.

How much will the IRS usually settle for?

As a seasoned tax attorney, the question I hear most frequently is: “How much will the IRS usually settle for?” It’s the million-dollar question, quite literally for some. The answer varies. 

The IRS, despite what some may think, isn’t a greedy ogre guarding a pile of gold. They’re more like a meticulous librarian: they simply want what’s owed to them. Now, how much of that can be waived or reduced under exceptional circumstances is where the intrigue lies. 

When it comes to an Offer in Compromise (OIC) — the IRS’s program to settle for less than the amount owed — the IRS generally looks at your ability to pay, your income, your monthly expenses, and your asset equity. Think of it as an IRS-designed algorithm where your financial life is the input, and the output is the least amount you can feasibly pay. The IRS isn’t looking to wring you dry; they’re after a practical solution.

In my experience, I’ve seen successful OIC settlements range from 1% to 99% of the original tax debt. That’s a vast range, I know. Imagine walking into a store and seeing a product priced anywhere from $1 to $99. That’s the realm we’re dealing with. 

It’s worth noting that in 2019, the average amount the IRS accepted in an OIC was $10,234. Now, this doesn’t mean your offer will be accepted if you throw that number out there. Remember, the IRS isn’t running a clearance sale, and one-size-fits-all doesn’t apply here. Your financial situation is unique, and your settlement will be too.

The key takeaway here is that settling with the IRS is a deeply individual process. Like making a custom suit, it takes careful measurements (of your financial situation) and skilled tailoring (expert negotiation) to get a perfect fit.

Does the IRS ever negotiate settlements?

Does the IRS, the monolith of federal agencies, ever bend its rules and negotiate settlements? The answer, quite delightfully, is a resounding yes.

You might be surprised to learn that the IRS is more akin to a savvy merchant at a bustling bazaar than an unyielding giant. They negotiate settlements through a process known as an Offer in Compromise (OIC). It’s a scene straight from a tax-version of ‘Arabian Nights,’ where the taxpayer and the IRS haggle until they reach a mutually beneficial agreement.

With an OIC, you offer to pay a lump sum or short-term payment plan that’s less than your full tax liability. Think of it as a grand bargain sale where the price tag is your tax debt. The IRS, in return, takes a good hard look at your financial situation—your income, expenses, asset equity, and ability to pay. It’s as if they’re examining the quality of your goods before they decide to barter.

Of course, the IRS isn’t going to be persuaded by a flashy smile and eloquent sales pitch. Their focus is on numbers, cold hard facts, and your ability to pay. It’s essential to come prepared with accurate financial data and realistic expectations. The IRS isn’t known for their charity after all.

Now, it’s worth noting that not all OICs are accepted. In 2019, the IRS received about 54,000 OIC applications and accepted approximately 18,000. So, while it’s not a guaranteed success, with proper preparation and guidance, it’s absolutely possible.

So yes, the IRS does indeed negotiate settlements. They aren’t quite the rigid Goliath you might’ve imagined. They’re willing to barter under the right conditions. Who knew tax law could feel like a bustling marketplace full of surprise and negotiation? Quite the plot twist, wouldn’t you say?

How does IRS settlement work?

IRS settlement, quite like the tango, is a dance of grace and calculation. It primarily unfolds through an Offer in Compromise (OIC), a program where you propose a lesser amount to clear your debt. Here’s how it works: you submit a detailed OIC application, essentially a dance card for your financial situation. The IRS reviews this, steps to the beat of your income, expenses, and ability to pay, and decides whether to accept your offer. It’s a delicate dance, indeed. But remember, with the right guidance and preparation, you could be two-stepping your way to a successful settlement.

How long does it take to settle with the IRS?

Much like preparing a gourmet meal, settling with the IRS is not a fast food process. It’s not “Pennies on the Dollar.” On average, an Offer in Compromise (OIC) can take 6 to 9 months. This process includes preparing an application for your account, awaiting the IRS’s review, and negotiating the settlement. However, each case is unique, like individual recipes. Some may require additional seasoning – detailed information, revised offers, extra negotiations – extending the process. So, while you can’t speed cook an IRS settlement, remember, the best meals (and tax resolutions) are worth the wait.

How to reduce taxes owed to the IRS?

Reducing taxes owed to the IRS is a bit like pruning a bonsai tree—it requires care, strategy, and a bit of finesse. There are several routes to explore. You could negotiate an Offer in Compromise (OIC), a program that enables you to settle your tax debt for less than the full amount owed. Alternatively, you might qualify for penalty abatement, which can trim down those pesky penalties and late fees. Lastly, setting up an installment agreement could help manage the burden. And don’t forget, like in bonsai pruning, enlisting an expert’s hand can make all the difference. 

Call The Tax Defenders today for a FREE attorney consultation at 312-345-5440.