Use these strategies to negotiate effectively with the IRS in 2022.
- Choose the right resolution program
- Understand the rules and requirements for the program
- Be prepared with financial details and tax code knowledge
- Don’t take no for an answer
- Stay positive
- Provide required info but not too much info
- Get compliant with filing and payment requirements
- Don’t miss deadlines
Owing back taxes or having unfiled returns can be stressful and confusing. IRS notices can be scary, especially if you’re not used to dealing with this agency. It’s important to understand that your outcome is not set in stone. There is room to negotiate with the IRS.
Negotiating with the IRS, however, takes experience and finesse. You need to understand your options and how the tax code affects your situation. This guide will help you negotiate with the IRS as efficiently as possible. You don’t have to deal with the IRS on your own — you can get help from a tax resolution professional who can negotiate on your behalf.
The first step is to call the Silver Tax Group if you’re struggling with back taxes, unfiled returns, or other tax problems. They can help you understand your options create a customized plan for your situation, and then negotiate with the IRS on your behalf. They understand the tax code, the tax resolution options, and how to deal with IRS agents. Here’s what you need to know about the negotiation process.
Choosing a Tax Resolution Strategy
Effective negotiation requires an understanding of your options. You can’t simply call the IRS and tell them that you want a lower tax bill. You need to use a prescribed tax resolution option. Here are the main tax resolution options if you owe back taxes.
1. Penalty Abatement
The penalties for not paying or filing tax returns can be severe. The penalty for not filing is 5% of the tax owed, and it is applied every month until it gets up to 25% of the balance. The penalty for paying late is 0.5% of the tax due, and it is also applied monthly until it gets up to 25% of the balance.
This is for income tax returns. There are also penalties such as the Trust Fund Recovery Penalty. This applies to businesses that don’t pay payroll taxes, and it can be 100% of the tax bill.
The IRS sometimes offers penalty abatement. You have to convince the agency that there was a good reason that you paid or filed late. The IRS is more likely to offer penalty abatement to people who have incurred penalties for the first time, but if you’re a good negotiator, you may be able to convince the agency to remove all the penalties.
2. Offer in Compromise Based on Doubt As to Collectability
An offer in compromise is when the IRS lets you pay your back taxes for less than you owe. You must convince the agency that your offer is the most that they will be able to collect. This requires you to present detailed financial information to the agency.
The way you present your information has a direct impact on whether the IRS accepts your offer. An experienced tax professional can help to ensure that you present your offer in the best light possible.
3. Offer in Compromise Based on Doubt As to Liability
You may also be able to get your tax bill reduced based on doubt as to liability. This applies when there is a doubt that you owe the tax. Making this argument requires you to have a solid understanding of the tax code. That is why it’s best to work with a professional if you decide to take this path.
4. Offer in Compromise Based on Effective Tax Administration
This program also reduces your tax bill. It applies to people who can afford to pay and who agree that they owe the tax but forcing them to pay the tax bill would be unfair. The IRS usually only lets you participate in this resolution program if you have a serious illness or are at an advanced age.
You must negotiate with the IRS to convince them that making you pay the back taxes would be inequitable. Here’s an example of someone who might qualify for this program. They could afford to pay the tax bill if they sold their home, but they have cancer, and it would be burdensome for them to sell the home now.
5. Payment Plans
Monthly payment plans don’t necessarily require a lot of negotiation. People who can afford to pay their back taxes in monthly payments over the next six years can usually qualify for a payment plan automatically.
People who need more time, however, may need to negotiate. They will need to prove to the IRS that they deserve more time to pay. They may also need to prove that they can only afford to pay a small amount every month.
6. Innocent Spouse Relief
Innocent spouse relief comes into play when the back taxes are due to your spouse or ex-spouse’s actions. There are strict qualifications for this program, and you have to convince the IRS that you shouldn’t be liable for the tax.
This happens when one spouse didn’t report income, and the other spouse didn’t know about it. You have to convince the IRS that you didn’t know about the unpaid tax and that you had no reason to know.
7. Hardship Status
Hardship or currently-not-collectible (CNC) status is when you convince the IRS that you can’t afford to pay anything right now. The IRS stops all collection actions on your account. The agency reviews the situation every couple of years to see if anything has changed. It may start collection actions again if it looks like your financial situation has changed.
You may be able to get a very basic resolution option without much negotiation. Imagine, for example, that you owe $5,000 and you want to pay $500 a month for 10 months. The IRS will probably easily approve this plan. Other tax resolution options, however, aren’t as straightforward. They require negotiation as noted above. Keep reading for more tips on how to negotiate with the IRS.
Negotiating With the IRS
Negotiating with the IRS doesn’t just require you to be a stronger debater. It requires you to have extensive knowledge of the tax code. Keep these tips in mind as you get ready to negotiate with the IRS.
1. Be Prepared
Don’t go into IRS negotiations blind. Make sure that you have everything you need to present your case. That may include financial details about yourself or your tax liability. It may include information about your personal situation if you’re applying for a program like innocent spouse relief.
You need to be armed with information about the tax code if you’re applying for an offer in compromise based on doubt as to liability. The preparation steps vary based on the resolution option you pursue. Make sure that you understand the program and its requirements before you start negotiating.
2. Don’t Take No for an Answer
The IRS agent may say no when you first approach them. Don’t let this be the final answer. Your next step may vary depending on the situation, but you should look for a way to get past the initial rejection.
Ask to speak with a supervisor. You may want to do this in cases where the IRS agent doesn’t agree with your interpretation of the tax law or if they don’t get along with you. You may be able to appeal certain decisions.
There are several different IRS appeals processes. Some appeals must be written to follow the strict presentation rules. Others require a request for a hearing which can be in person or over the phone. Still, other appeals can go to the tax court, but in all cases, you’ll need to meet the appeals deadline.
3. Stay Positive
It takes time and knowledge to negotiate with the IRS, and while this can be very frustrating, don’t let the stress wear you down and make you snap. IRS employees are people, and they are often stressed and overworked as well.
Try to remain positive when dealing with the IRS. Don’t get angry, because this will not help your situation. You’ll need to maintain a level and calm approach if you want to negotiate effectively with IRS employees.
4. Provide the Requested Information
The IRS may ask for a variety of different types of information. Say you’re applying for an offer in compromise, for example. The agency may ask for financial documents to verify the information on your application. You need to provide payroll documents, for example, to substantiate your income.
Don’t delay when you’re asked for more information, because this can slow down the process. The IRS tends to be more willing to work with taxpayers who comply with requests in a timely fashion. Not providing the requested information may lead to an adverse decision or a disqualification.
5. Don’t Provide Excess Information
You should never hide information from the IRS. This can be considered tax evasion or fraud, depending on the situation. Lying to the IRS is illegal.
That doesn’t mean that you should reveal every detail to the IRS. Provide the IRS with only the information requested. Giving them unnecessary information may make it harder to negotiate the outcome you want.
6. Stay Compliant
Most tax resolution programs require you to be compliant with tax filing and payment obligations. You can’t set up a payment plan, for example, if you have a lot of unfiled returns. The IRS will be more likely to negotiate if the agency sees that you’re making a good faith effort to stay compliant with the tax rules and regulations.
7. Pay Attention to Deadlines
The IRS has strict deadlines, especially for appealing tax assessments or rejections for tax resolution programs. Pay attention to the deadlines if you want to be successful when dealing with the IRS. Contact the agency if you’re going to miss one.
A tax professional can help you through this process. They cost money upfront, but their services are an investment for your situation. They can steer you toward the ideal resolution option and can help you negotiate with the IRS.
Mistakes To Avoid When Negotiating With the IRS
Most people make mistakes when they deal with the IRS. Avoid these mistakes if you want to be successful.
- Don’t ignore the IRS. The situation will get worse if you ignore them. The IRS can seize assets and garnish wages if you have unpaid taxes.
- Don’t hide information from the IRS. Hiding information or assets may be tempting, but it’s illegal. That doesn’t mean, however, that you should provide excess information.
- Don’t hire the cheapest option. Tax resolution is a complicated process. Look for a tax professional with a blend of value and experience.
Many IRS resolution programs have low approval rates or complicated application processes. Don’t waste time and energy applying for a program you’re not going to get approved. A tax professional can assess your likelihood of approval and help you make decisions that are invaluable for your time and your budget.
Get Help From the Silver Tax Group
The Silver Tax Group can help if you’re dealing with unfiled returns, back taxes, penalties, and other IRS problems. We are a group of tax attorneys devoted to helping people deal with the IRS. We can give you a free consultation when you call our office.
We’ll discuss the best options for your situation, and once you’ve decided on a resolution plan, we will negotiate with the IRS. The tax code is complicated, and if you want the best results for your situation, work with a tax professional who understands the IRS rules and procedures. Contact us today to get help.