The Lawyer's Guide to Tax Settlement

Before You Begin

First and foremost, take a deep breath. Although tax debt can feel overwhelming, your tax problems can be resolved with a little work, strategizing, and planning. Secondly, and just as important, the Internal Revenue Service will work with you on a fair and reasonable resolution, no matter how bleak the situation may seem.

With that said, the worst thing you can do is to run from your tax debt problem. The IRS will eventually catch up to you, the overall tax debt will be even higher than it is now, and the IRS may proceed with collection alternatives, levies, or garnishments. In most cases, forced tax collection can place a Taxpayer in unnecessary financial and emotional stress and make very private issues public. The last thing any Taxpayer wants is for their family, friends, or employers to be notified that you have unpaid taxes.

Negotiating with the IRS is a process and you may choose to deal with them on your own. However, if the tax collection process becomes overbearing or you are not sure how to proceed, it may be in your best interest to seek out a tax professional who deals with the IRS on a regular basis.

If you choose the latter route, it is best to find a tax professional that you can trust, makes you feel comfortable, will respond quickly, and who will hold your hand through the process. At the end of the day, find someone who fits your individual needs the best, and feel free to look around.

When you meet with a tax professional make sure you ask them how they will help you, how much their retainer will be, and how long it will take to resolve your tax problem. Never pay outlandish retainers and be skeptical of anyone who makes extraordinary claims and requires very little information or work from you. Remember, a tax professional cannot prepare an adequate strategy without documents, information, and responses from you.

Whether you choose to represent yourself or hire a tax professional, your settlement options should be considered carefully. The following section is intended to provide you with a basic overview of the options available to most Taxpayers.

What Options Are Available?

Click on one of the 4 options below to highlight the information

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Final Thoughts and Concerns

  • Request abatement of penalties

    One overlooked strategy for taxpayers is to request an abatement of penalties and/or interest of past due taxes. Typically, the IRS will remove penalties for a tax period if the taxpayer has had no penalties assessed the past 3 tax periods. At a minimum, it never hurts to ask.

  • Know that you are not alone

    Millions of taxpayers fail to pay their liabilities each and every year. You are not alone and this is not the end of the world. Face the problem head on, work with the IRS on a settlement plan, and take steps to prevent it from happening again. Do not force the IRS to garnish, levy, or seize assets, because they will work with you as long as you are willing to work with them.

  • In most situations, the IRS has two very simple requests
    • Communication. They want to hear from you. They don’t want to hunt you down or utilize alternative collection methods. If you or your representative contact the IRS, they will most likely give you time to put together and negotiate a tax settlement plan.
    • Compliance. Before the IRS will enter into any agreement with you, they will almost always require that you prepare and submit all past due tax returns. Gathering the documents to prepare these returns can be timely, but a good tax practitioner can request IRS tax transcripts and prepare past due returns.
  • Do not let your installment agreement or offer in compromise default!

    Do not let this happen again! Failure to timely file all future returns or pay future taxes due could default an agreement with the IRS. As mentioned previously, a good tax professional can help you prepare for future tax obligations and help prevent a default.