Warming Up To Tax Settlements

Don’t fear an IRS payment plan

Ask yourself this question, “Who approves or denies, the thousands of tax settlements at the Internal Revenue Service?”  Is there one person sitting in a VERY big chair dictating who can and can’t receive a tax settlement?  The simple answer is, “No”.   

If you can’t pay taxes you owe, don’t be afraid of the IRS.  The IRS consists of rational people, just like you and me, who understand the hardships people go through.  We might view them as experts, when it comes to understanding people’s financial problems.  IRS agents have great skills and experience in helping taxpayers, since they spend 5 days a week working with tax problems.  

I am sure their job isn’t easy.  Tax laws and IRS guidelines govern collection behavior against taxpayers, however IRS agents may use some collections efforts at their discretion.  They must know when to apply harsher actions against cheats, and other taxpayers trying to evade taxes.   This is why I say time and again, it is important to get your tax case in front of the IRS as soon as possible.

The IRS will look at your actions, before and during negotiations of your tax debt.  They will certainly treat nicely, those who have been diligent in resolving their tax debts.  People who ignore letters, or show patterns of not paying taxes, will have a harder time dealing with an IRS agent.  So, it is important to put your best foot forward early, when dealing with IRS back tax problems.

Should You Hire Professional Help To Settle Your Unpaid Taxes?

The answer to this question varies, and boils down to how much you owe.  If you owe $3000 in back tax debt, you don’t want to spend $3000 on professional help.  Conversely, if you owe $50,000, paying $5000 for professional help seems very reasonable.  At first glance, the price of professional help might seem expensive, but it is well worth every penny.  Tax settlement is complicated process that requires knowledge and experience to get it right.

Here is what you pay for, when you hire a back tax professional

Hire a back tax professional when your tax debt is high.  You might get an opportunity to pay less than you owe, if you have the right professional help.  When I say “less”, I am not necessarily referring to an Offer In Compromise; very few qualify for that IRS Payment Plan.   You can pay less than you owe in other ways, such as: penalty abatement, amending tax returns, 10 year statute of limitations, partial installment agreements, partial “payment” installment agreements, etc.  The list of possible solutions is long, so unless you have time for a second job and a full-time college career, you probably want to have a professional dive into your tax debt problem.  The problem with Do-It-Yourself settlement (Novice), you may never know if you negotiated the best solution.  A good settlement is especially relevant, when you owe a lot of taxes.

Aside from having knowledge of IRS programs, you must also negotiate your terms.  Negotiating with the IRS takes expertise.  Removing penalties or making a case for an Offer In Compromise shouldn’t be done as a, “first time around” test.  A lot is at stake if IRS negotiations fail.  Complicating things further, representations made to the IRS remain logged in a database, making it hard to back-track if your settlement outcome doesn’t work for you. 

Conclusion:

Do yourself a favor and consult a professional.  It will pay off, as long as the amount you owe is enough to offset the cost of professional help.  I would probably go with a 2:1 ratio on pricing for a tax settlement.  So if a professional costs you $4,000, you probably should have a tax debt of about $8,000, or more.  Of course, you could save yourself $4,000 dollars if you know for a fact you owe the $8,000, by calling the IRS yourself.   Even in this situation, I would recommend some tax expert.  At the very least, have a professional review the tax returns for a couple hundred bucks – the cost is minimal and could potentially save you a lot more.

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