When speaking to the IRS, keep the following in mind:
There are several ways to handle taxes owed to the IRS. Don't fall into the trap of deciding to pursue the IRS without sound knowledge. The IRS is highly trained to obtain as much information from you as possible for the sole purpose of collections. Many taxpayers attempt to contact the IRS to simply negotiate a payment plan, which proves difficult.
When you begin speaking to the IRS agents, they will start asking you probing questions regarding your income, place of employment, financial institution information, types of vehicles you own, the amount of your rent/mortgage payments, etc. This information is extremely beneficial to the IRS because it helps determine how to quickly levy, seize or place liens on your various assets. For example, the IRS agent may wish to have you commit to a payment that you are unable to afford.
The IRS manual clearly states that if a taxpayer agrees to a higher amount that he/she is required to pay under the National Standards, the IRS is not required to inform the taxpayer of their rights or any alternative programs that might be beneficial to them. This may sound unbelievable; however, it is true.
What are my solutions for back taxes?
There are many methods to settling back taxes with the IRS. The IRS has created settlement methods for every type of financial situation. There are thousands upon thousands of people that cannot pay taxes owed annually. The worst thing you can possibly do is just ignore the problem. If no agreement is made with the IRS, penalties and interest grow very quickly. Below are the settlement methods available under the IRS.
Offer in Compromise - An Offer in Compromise may be the best possible resolution for your tax debt if you qualify. An Offer InCompromise is an agreement between yourself and the IRS or State that resolves your tax debt for less than the amount owed. You can include all types of taxes, penalties, and interest in an Offer in Compromise. Even payroll taxes can be included.
Installment Agreement - If you do not qualify for an Offer in Compromise, the next best solution is the Installment Agreement. An Installment Agreement is an agreement between the IRS and the taxpayer where the taxpayer agrees to settle his tax debt by making regular monthly payments until the balance is paid off in full. There are specific and complicated formulas that the IRS uses to calculate the amount of the monthly payment. It is important that you seek advice to negotiate the amount of the payment. The IRS wants to make the payment as high as possible - even if it means putting you in a financial hardship situation.
Penalty Abatement - You may already know that a small delinquent tax debt can compound into an unmanageable amount within a short period of time. The reason is because of Penalties and Interest. Penalty Abatement will get your tax debt resolved in as short a period as possible. To get penalties eliminated, you will have to show that you had a good reason for not paying your taxes such as death of family member, health problems, thefts, fire, unemployment, and many more reasons. Seek advice, you may qualify!
Innocent Spouse - Couples filing joint returns are held equally responsible for the tax return and the payment of appropriate taxes. In some cases, though, one spouse has underestimated the tax liability and, unknowingly, the other spouse signed the return. In this case, the innocent spouse may not be responsible for paying the additional taxes and penalties. To your suprise, there are many techniques that can be used, it is important to know your choices.
Currently Not Collectable - In certain circumstances where the taxpayer is not working, has little or no income, is sick or seriously ill, is too elderly to reasonably expect to pay the back taxes, or has no assets of any liquidation value, the IRS may classify the taxpayers case "Currently Not Collectable". With the right knowledge, you can stop the tax payments!