Dealing with the IRS is stressful, especially when they’re hounding you over tax debt. If you’re one of the 20 million Americans who owe taxes to the IRS, remember that tax debt negotiation can prevent a federal tax lien from hurting your reputation and credit. Debt negotiation with the IRS such as an Installment Agreement will help you avoid tax penalties and interest that will only continue growing your existing tax debt. In 2011, the IRS received nearly 60,000 compromise requests, as more and more people realize the power of tax debt negotiation.
Debt Negotiation with the IRS
To successfully barter tax debt with the IRS, file Form 656. If you don’t want to deal with Form 656 and the accompanying paperwork, tax attorneys and experts are willing to help. When completing the paperwork yourself, it’s crucial to include all information and paperwork requested according to their timetable. Three different options for tax debt negotiation with the IRS include:
- Establishing an Installment Agreement. With this method you will still pay your tax liability, except you have the ability to agree upon a set timetable of payment.
- Filing to a compromise. If you are unable to pay back your full tax debt, this option allows you to compromise with the IRS and only pay back a negotiated portion of your liability.
- Claiming “currently not collectible.” Whether you’re unemployed, face a medical emergency, or something completely unexpected, if you cannot pay back your taxes whatsoever, you can file for a “currently not collectible” status with the IRS assuming evidence is provided about your situation. Uncle Sam will then back off for a year or two as you re-establish yourself financially. This method of tax debt negotiation is the hardest to provide, but is especially beneficial for those who truly need it.