Tax Blog

How to Settle with the IRS by Yourself

By Kelly Hanley, Esq., Tax Attorney

As a tax attorney who’s danced with the devil – or rather, the IRS – for the past two decades, I’ve found that sometimes the foxiest moves you can pull off on the dance floor of financial difficulty are the ones you execute yourself. Let me guide you through the captivating tango of settling your tax debt on your own. After all, who says you need professional shoes to dance?

Unmasking the Specter of IRS Tax Debt: What You’re Up Against

Before you attempt to twirl with your partner, it’s important to understand their moves. The IRS, despite its formidable reputation, can be surprisingly accommodating in resolving back taxes – a revelation that contradicts the common narrative.

Tax debt may loom large, but it’s not a one-dimensional monster. Think of it more as a Rubik’s cube, complex yet solvable. The IRS offers various methods of debt relief, each with its own intricacies. Remember, we’re not playing checkers here; this is 3D chess.

Dispelling Myths: Can I Negotiate with the IRS Myself on BackTaxes?

Yes, you can! It’s not an impossible task, nor is it akin to taming a rabid grizzly bear with a feather. It may seem counterintuitive, but the IRS doesn’t want to see you crushed under an avalanche of debt. It prefers that you pay what you owe over time than not at all. The IRS may have a stern exterior, but underneath, it’s a pragmatic dance partner.

The Cha-Cha of IRS Debt Relief: Understanding Your Moves

Knowing your options for settlement is like mastering different dance styles. You have to pick the one that suits the rhythm of your situation. Let’s waltz through some of the most common ones.

1. Installment Agreements: The Waltz of Repayment

An installment agreement allows you to pay your tax debt in monthly installments, like a credit card bill – but with less shopping involved. It’s a steady, measured dance that allows you to find your footing.

2. Offer in Compromise: The Tango of Negotiation

An Offer in Compromise is a fast-paced tango, where you negotiate a lump-sum payment less than the total owed. It’s like convincing your dance partner that a trip to the vending machine is just as good as a five-course meal. Not an easy task, but doable with the right moves.

3. Penalty Abatement: The Jive of Justification

With Penalty Abatement, you’re asking the IRS to waive penalties due to reasonable cause. Imagine doing the jive with a straight face – tricky, but with a solid reason and a dash of humor, you might just pull it off.

Stepping onto the Dance Floor: The Settlement Process

Now that we’ve mastered our dance steps, it’s time to step onto the dance floor. How do we begin this tantalizing tango with the IRS?

1. Understand Your Debt: Knowing the Rhythm

Just as you can’t dance to a song without understanding its rhythm, you can’t settle your tax debt without understanding its components. Get a detailed breakdown from the IRS. If the figures seem as inscrutable as a gorilla performing ballet, remember – clarity is only a phone call away. Reach out to the IRS and ask for an explanation.

2. Assess Your Financial Situation: Setting the Tempo

Your financial status determines the tempo of your dance. Assess your income, expenses, assets, and outstanding debt. Your capacity to pay will dictate whether you waltz, tango, or jive.

3. Select Your Dance: Choosing a Settlement Option

Based on your financial situation, choose the settlement option that suits you best. Remember, it’s not about the most elegant dance; it’s about what you can sustain without stumbling.

4. Make Your Move: Filing the Request

File your request with the IRS. It may seem as daunting as leading a dance for the first time, but the IRS has clear instructions and forms available on their website.

5. Keep in Step: Comply with the Agreement

Once you’ve agreed on a settlement, it’s crucial to stay in step with the terms. The IRS may have agreed to dance, but they’ll be quick to step on your toes if you miss a beat.

Conclusion: Mastering the Dance of IRS Debt Settlement

Settling your tax debt with the IRS by yourself might seem like a daring dance, but with the right moves, you can navigate the dance floor with confidence. Remember, the IRS isn’t your opponent in this dance; it’s your partner. So, don your dancing shoes, find your rhythm, and take the first step toward debt relief.

Sure, this isn’t a dance you’ll want to perform again, but mastering it could save you a fortune, not to mention the unquantifiable relief of having that IRS specter off your dance card. So, will you sit this one out, or are you ready to dance?

For a FREE consultation with an Experienced Tax Attorney, call today at 312-345-5440.

How much will the IRS usually settle for?

In the thrilling dance of tax settlements, many folks wonder, “Just how low can the IRS go?” If I told you that in some cases, the IRS settles for pennies on the dollar, you might think I’ve lost a step. But hold onto your dancing shoes, because it’s true.

Contrary to the common narrative, the IRS isn’t the Big Bad Wolf huffing and puffing to blow your house down. It’s more like a dance partner with two left feet, willing to make compromises so that both of you can keep dancing.

Now, before you start planning a ball on a shoestring budget, keep in mind this doesn’t mean the IRS will accept pocket change for a mountain of debt. The IRS isn’t running a charity gala, after all. Your offer should be reasonable, taking into account your income, expenses, asset equity, and ability to pay.

The exact figure can vary widely depending on these factors. In some instances, the IRS has accepted as little as 1-2% of the original debt. In others, it may be closer to 80-100%. Like any good dance, it’s all about finding the right balance.

In the end, the IRS wants to ensure it gets something rather than nothing. And if you can demonstrate that your offer is the most they can realistically expect to collect, they might just take you up on it.

Does the IRS have a debt forgiveness program?

You’re struggling with back taxes and suddenly, like a fairy godmother, the IRS swoops in, waves a wand, and POOF! Your tax debt is gone. Sounds like a scene straight out of a fairy tale, doesn’t it?

Well, this might come as a surprise but in a way, it’s not entirely the stuff of dreams. There’s a program that could, in a roundabout way, be called an IRS Debt Forgiveness Program – though the IRS prefers the less enchanting term, Offer in Compromise (OIC).

The OIC is not your typical fairy tale magic, but it allows taxpayers to settle their debt for less than they owe, a deal as delicious as a pumpkin turning into a royal coach. The catch? You have to prove to the IRS that you can’t pay the full amount due to financial hardship, or that doing so would create an unfair or inequitable situation. It’s as if Cinderella had to prove her glass slipper fits before getting her Prince Charming.

However, be warned that the IRS doesn’t accept every foot that tries to squeeze into the glass slipper of OIC. According to the IRS Data Book 2018, of the 54,225 Offers in Compromise received, only 19,000 were accepted. That’s a rate of about 35% – not exactly happily-ever-after odds.

So yes, while the IRS doesn’t offer ‘debt forgiveness’ with a wave of a wand, the Offer in Compromise program does provide a path to resolving tax debt – a potential glass slipper for those who fit. But remember, every Cinderella has to find her own way to the ball!

What is the best way to negotiate with the IRS?

While the thought of negotiating with the IRS may seem as daunting as dancing on a tightrope, there’s no need to panic. Consider this: every great dance is a negotiation of space, rhythm, and connection. Mastering this dance with the IRS comes down to three core steps.

Step 1: Know Your Dance Floor: Understand Your Debt

Imagine attempting the tango on a floor filled with marbles. Not a pretty sight, right? Similarly, you can’t begin to negotiate with the IRS without first understanding your debt. Get a clear breakdown and if it seems as complex as a salsa rhythm, don’t hesitate to ask the IRS for clarification.

Step 2: Find Your Rhythm: Assess Your Financial Situation

In any dance, the rhythm dictates your moves. If you’re out of sync, you’re likely to step on your partner’s toes. Assess your income, expenses, and financial capacity honestly. Only then can you confidently approach the IRS with a proposal you can stick to, one that’s in sync with your financial rhythm.

Step 3: Choose Your Dance: Decide Your Settlement Approach

Different situations call for different dances. Based on your financial assessment, decide whether to propose a payment plan (Installment Agreement), an Offer in Compromise, or seek Penalty Abatement. It’s not about what looks best, but what works best for you.

Negotiating with the IRS isn’t a duel but a dance. Be honest, be prepared, and don’t be afraid to ask for clarifications. Remember, even if you feel like you have two left feet, with the right steps, you can lead this dance.

What to do if you owe the IRS a lot of money?

Finding out you owe a small fortune to the IRS can feel like facing a dance-off against a professional breakdancer – intimidating, to say the least. But fear not. Even in the face of a hefty tax bill, you’ve got moves to make. Let’s put on our dancing shoes and learn how to gracefully foxtrot around this mountain of debt.

Step 1: Catch Your Breath: Don’t Panic

Upon receiving a tax bill that seems larger than life, your first instinct might be to run for the hills. But remember, fleeing the dance floor isn’t a strategy. Instead, take a deep breath, count to eight, and prepare to face the music.

Step 2: Understand the Choreography: Review Your Tax Bill

Study your tax bill like a complex choreography. Ensure the amount owed is accurate. If it seems as outlandish as a tap-dancing flamingo, contact the IRS or a tax professional to understand where these numbers are coming from.

Step 3: Find Your Beat: Explore Payment Options

Even if you’re not flush with cash, the IRS offers several debt payment plan solutions. You may be eligible for an Installment Agreement or an Offer in Compromise, allowing you to settle your debt over time or even reduce the amount owed. Now, that’s a dance move worth mastering!

Step 4: Take the Lead: Contact the IRS

Taking the lead is key in any dance. Reach out to the IRS and propose a payment plan that suits your financial situation. Be prepared to provide details about your income, expenses, and assets.

How much should I offer in compromise to the IRS?

Deciding your Offer in Compromise (OIC) to the IRS can feel like choreographing a dance without knowing the music. How do you strike the right balance between what you can afford and what the IRS will accept? Here are some steps to keep you in rhythm.

The IRS isn’t expecting you to breakdance if you’ve only just mastered the two-step. They determine the minimum OIC amount based on your “Reasonable Collection Potential” (RCP), which is like your dance skill level – it takes into account your income, assets, expenses, and future earning potential.

Before you decide on your offer, you’ll need to calculate your own RCP, like choreographing your routine before the big dance-off. Use the IRS’s guidelines and financial analysis forms to make sure your arithmetic is as spot on as a perfect pirouette.

Once you’ve calculated your RCP, that’s the minimum you should offer. If you can afford to offer more without falling off rhythm, it may increase your chances of acceptance. But remember, don’t promise a high-flying leap when you can only manage a humble hop.

So, deciding how much to offer in compromise to the IRS is a delicate dance. You must balance your ability to pay with the IRS’s need to collect. So put on your dance shoes, warm up, and remember – it’s not about the grandest move but about what keeps you moving gracefully.

Call The Tax Defenders today for a FREE consultation with an Experienced Tax Attorney. (312) 345-5440.