Negotiating with the IRS for Tax Debt Resolution

Last updated on July 3, 2023

Negotiations with the IRS for debt resolution are conducted when you cannot pay the full tax debt amount and seek a resolution through a payment plan. The IRS always looks to collect as much of a tax debt as possible, but taxpayers can negotiate the conditions of an agreement with the IRS to achieve a resolution they can afford. A successful negotiation can mean paying less in tax debt and/or getting more time to pay.

Paying Less in IRS Tax Debt

If you do not have the ability to pay your entire tax debt, you may be able to pay a reduced amount and resolve your tax debt more affordably. To achieve a reduction in tax debt, you need to prove to the IRS that you have limited financial capability. The IRS will request that you provide basic financial information or a financial statement. The IRS requires a financial statement in order to determine how much a taxpayer can pay. The IRS cannot force a taxpayer to make payments that would result in a financial crisis.

It is always best to engage the services of a licensed tax professional to conduct negotiations with the IRS. Licensed tax professionals, which includes enrolled agents, tax attorneys, and certified public accountants, provide taxpayers with an added advantage in negotiations. Their in-depth knowledge about tax laws and experience dealing with the IRS allows for better negotiations and results in a final agreement that is the more affordable for the taxpayer.

Getting More Time to Pay IRS Debt

Taxpayers can pay their tax debt over months or years by qualifying for an Installment Agreement. Under a streamlined Installment Agreement, you pay the full tax debt amount, including penalties and interest, but you pay it over a longer period of time. Even though paying over more months is convenient, the longer you take to pay your tax debt, the more you will need to pay due to the monthly penalties and interest assessed by the IRS.

Streamlined Installment Agreements are commonly used by taxpayers who can pay their full tax debt. On the other hand, if a taxpayer cannot pay any amount of tax debt, then they should consider applying for Currently Not Collectible (CNC). Only taxpayers that have no capability to pay any amount of tax debt can qualify for CNC. It allows taxpayers to postpone payment of their tax debt. If they qualify for CNC, they do not need to pay any amount of tax debt until their financial situation improves.

If your financial condition does not allow you to pay your full tax debt, we recommend that you use expert help to negotiate with the IRS so that you get the maximum tax debt reduction, get more time to pay, or both.