Question: Is it possible to negotiate a tax settlement to pay less back taxes than I owe?
Answer: Yes, but not in the way that you are thinking. When my clients ask this question, it’s usually after they have heard a catchy advertisement. The client thinks that if they offer the government an arbitrary percentage of the back taxes owed, that the IRS will go away. For example, if the client owes $30,000.00 in back taxes and they offer to pay $10,000.00, the IRS would say, “thank you for the $10,000.00 when will you get us our $20,000.00.” If the IRS allowed the above negotiations, then there would be no incentive to pay taxes because you could pay less at a later date.
There are different methods to reduce or eliminate a tax debt. You can apply for innocent spouse relief, file an amended or original return, submit a doubt as to liability offer in compromise, demonstrate a financial hardship, although rare, eliminate tax penalties, eliminate interest, although rare, apply for an audit reconsideration, execute a partial pay installment agreement, submit an offer in compromise based on doubt as to collectability, file for bankruptcy, let the statute of limitations on collection run out, utilize accounting methods to offset liabilities, or contest the tax liability in various courts.
All the above methods can reduce or eliminate back taxes. A tax attorney can help you analyze each method’s applicability to your unique set of circumstances and assist in helping you execute a plan.
