Can I Settle My Back Taxes with the IRS For a Lower Amount?
Firstly, the simple answer is yes, you can settle your back taxes for a lower amount with the IRS. However, there are many stipulations and rules you will face before you are able to achieve that goal. You can file a form with the IRS called an “Offer in Compromise.” On the most basic level, an Offer in Compromise technically allows you to erase most of the back taxes you owe by making an “offer” to the IRS of an amount of money you feel you can safely afford. For instance, if you owe $100,000 in taxes you can offer the IRS $5,000 because that is what you determined you can actually pay. However, this simple situation doesn’t accurately represent the whole process.
In order to reduce your back taxes and have your offer accepted by the IRS, you have to really be struggling financially – meaning, there is no equity on your home, you have no assets, investments, and you will never make enough money in your lifetime to pay what you owe in taxes back. If the IRS determines this is the case, they will settle with you for a relatively small monetary amount to avoid the costs associated with seizing any assets you do have.
If you determine you can successfully take this course of action, you must fill out two forms for the IRS – Form 656 and Form 433-A for a charge of $150. These forms will have you list the whole value of any assets you may have, like your home and all sources of income. Additionally, you must also include a non-refundable partial payment of 20% of the settlement offer.
Once you submit your paperwork to the IRS, specialized government examiners will review your case and determine if the information you provided would allow you to settle for the amount you requested. At this point, your case will either be accepted, or they will come back to you with a different settlement number. You may need to be prepared to negotiate.
Once you accept your offer, you can choose to pay the whole lump sum once, or spread it out over no more than 5 payments. You have 90 days to pay back what you owe, although the 90 days may begin a year later, giving you ample time to come up with the remaining money.
If you have found yourself in need of help with settling your back taxes for a lower amount with the IRS, Anderson Bradshaw Tax Consulting is here to assist you along the way. Our tax experts are well-versed in all IRS tax related matters. For a free 30-minute consultation, please contact us at 877-550-3911. To learn more, visit www.AndersonBradshawTax.com.