Is there any information anyone has that I can use to help lower the amount I "owe" the IRS?

Question

If you "owe" tax, is there a way you can negotiate with the IRS to reduce what you owe. Before you get the wrong idea, I drive a hoopty car, have no savings, and generally live like a lower middle class member of society. I do work hard like millions of other Americans, and am a disabled vet. I do not collect any public assistance like free healthcare, foodstamps, medi-cal, or get any other free stuff like many illegal immigrants do. If you haven't been in this type of situation before, you should see the crazy paperwork the IRS sends. I can barely read over the forms before my eyes cross! I can't afford a CPA and I totally think I am going to srcewed over and not even get any of the sweet pillowtalk! If you have any legitimate advice I will be greatly appreciative!

Answer 1

It would be difficult to give a precise answer with the detail you have given.   If you can't afford to pay for tax help and your eyes glaze over your best bet would be to go to the closest IRS office or see if there is a low income tax clinic in your city.  IRS offices will provide the same information that toll free will but will answer questions and help you fill out forms.  Low income tax clinics are staffed by volenteers and will provide free or low cost help.

In general there are only 3 ways to pay less than the full amount owed; bankruptcy, offer in compromise,and the statute of limitations expireing.

Most taxes are dischargeable in bankruptcy if they are at least 3 years old .  This is from time of assessment, not calender years.

Offer in compromise.  Not many are accepted so don't beleive the late night comercials.  The thing that you have to remember is that OIC has to be a good deal for the government, not just you.  

Any tax that you owe on the collection statute experation date are forgiven and the IRS cannot collect.  The CSED is usually 10 years from the time the tax is assessed but things like OIC and bankruptcy can extend it.  You might get lucky and just not pay and let the statute expire but that is unlikely.  There are some things you can to while time passes to keep the IRS happy and still not pay the full amount.

If you truly can't afford to pay you might be able to be placed in currently not collectable status.  CNC dosen't mean the IRS has forgiven the debt, just that they think you can't afford to pay and they have stopped collection action until your financial condition improves.  Penalty and intrest will continue to accrue until the CSED or the debt is paid in full.

If you can pay something but not the full amount then a partial payment installmet agreement might be for you.  IRS will comput the amount you can afford and you make that payment until CSED.  IRS will review a PPIA every 2 years to see if your financial condition improves.

Answer 2

How much do you owe?  Unless it's in the tens of thousands and will obviously never be able to pay that amount and have no assets that can be sold, about all you can do is set up a payment plan.  It's sometimes possible to at least temporarily get it put into "uncollectable" status, but they will probably expect you to pay SOMETHING towards it each month.  Talk to someone at the IRS.

Good luck.

Answer 3

If you are unable to pay the liability in full you can file an offer in compromise to settle the account for "pennies on the dollar"  The amount you have to pay is, to use the IRS jargon, is "an amount that represents the reasonable collection potential of the account." This is a lump sum equal to what you could get from the equity in all your assets if they were sold at a quick sale, generally 80% plus 48 times what you could pay monthly on an installment agreement.

For example, if you had a car worth $10,000 and owed $5,000 on it and nothing else and IRS said you could make payments to IRS of $100 per month you would have to offer 80% of $10,000 minus the $5,000 owed = $3,000 PLUS 48 times $100 = $4,800 for a total of $7,800 on whatever you actually owed.

I am an enrolled agent, licensed by the US Treasury Department who specializes in taxpayers who have large unpaid tax bills and prepare these for clients. You do not have to have a representative but the process can be pretty intimidating if you haven't had any experience. That decision is up to you.

I got an offer for a client who owed a quarter million dollar liability accepted at 1 cent on the dollar. Many other clients have not qualified. The average nationwide for accepted offers is about 17 cents on the dollar. Your own affairs are probably more complicated. Your case might also dictate an entirely different approach including getting the whole account put on ice for a few years or filing for bankruptcy.

If you want to hire a professional representative--enrolled agent, CPA or attorney--stay away from the ones that advertise on cable TV. Their fees can be heart stopping and many of them are on the Better Business Bureau bad guys lists. As a solo practitioner, I charge about a third of what the "As Seen on TV" firms charge. If you want additional information outside this forum, you can email me through my profile.

Answer 4

The IRS does have a program called Offer-in-Compromise, but if you have any ability to pay you probably won't qualify. If you're confused by the forms the best bet is to simply call the IRS at the number on your collection notice. Depending on how much you owe and how old the debt is, you may be asked to give financial information to determine your ability to pay. This is simply a matter of telling them about your monthly income and expenses and any assets you own such as real estate, retirement accounts and investments. They may ask for proof for some items. If the net result is that your expenses exceed your income you would qualify for a deferment of collection. This will last until your income increases substantiatlly. Eventually, the debt will drop off as the statute of limitations expires. This is 10 years from the date of assessment although it can be extended if you filed bankruptcy or an offer-in-compromise.

Answer 5

The first thing I ask clients with this type of problem is, Do you really owe the amount they have indicated?  Frequently the returns for the involved years were not properly filed or not file at all and corrections can be made.  I have had clients that get money back after correcting their returns.  If the amount you owe is correct there is really very little that can reduce that other than paying it.  There are a few tricks but most don't work.  What ever you do don't fall for the TV adds.  You might consider a tax professional other than a CPA.  Most offices do a free consultation to determine if they can help.