How to Negotiate With the IRS – Everything You Need To Know

If you owe tax debt to the Internal Revenue Service (IRS), and you can’t afford the bill, it’s crucial that you know how to negotiate with the IRS. There are options for negotiation when you are in a financially difficult situation, and it may be possible to reduce how much you owe or give you more time to pay it. You should be aware of these options and the most effective methods to secure them.

Negotiating With the IRS

Not all taxpayers are able to negotiate their debts. The IRS takes nonpayment seriously. The agency collected $5.1 trillion in gross taxes in 2024, while also assessing $84 billion in civil penalties. When you are meant to pay the IRS taxes or penalties, you usually have to pay them. However, if you can prove specific circumstances apply, you could negotiate the amount.

Options for Debt Settlement and Negotiation

The IRS offers several programs and methods to negotiate your tax debt, collection actions, and settlements. Each has its own unique requirements. These options include:

• Installment agreements: An installment agreement is what the IRS calls a payment plan. The IRS established 3.4 million new installment agreements in 2024. You can pay back your tax liability at a set amount each month until the debt is fully paid off. This option does not reduce your debt, but makes it easier to repay. As long as you are on top of your payments, it also helps you avoid most IRS collection actions.
• Currently Not Collectible status: When you ask the IRS to mark your debt as Currently Not Collectible, it allows a temporary pause of collection actions. This is a short-term option, and the IRS may request financial information if you need the status for a longer period of time. This option is ideal if your financial difficulties are short-term, and you can pay back the full debt at a later time.
• Penalty abatement: This is when penalties are removed from your overall tax liability. It only applies to specific penalties for specific reasons. There were nearly 6.5 million abated penalties in 2024, according to the IRS, totaling over $75.2 billion.You could secure penalty abatement because of good tax compliance, or because something outside of your control stopped you from paying the IRS or providing the agency with accurate information.
• Innocent spouse relief: This relief is for specific circumstances when you are being held liable for tax debt created by your spouse on a joint tax return, and you were unaware of the debt that was created. It can result in the forgiveness of the relevant debt.
• Offer in compromise: An offer in compromise (OIC) is very useful but hard to get. In 2024, the IRS accepted 7,199 OICs, which was about 21% of the offers proposed. If your offer is accepted, an OIC allows you to resolve your full tax liability for a lower amount than you owe. You may pay in a lump sum or a periodic payment. Once you’ve paid the amount you agreed on with the IRS, the rest of your debt is cleared.

Several of these methods of debt negotiation are useful even if the IRS has already taken collection actions. You may be facing a lien on your property, a levy of your bank account, or wage garnishment. Negotiation could stop these actions or prevent further action.

How Do You Effectively Negotiate With the IRS?

IRS negotiations might happen by sending a request through the mail or by contacting an IRS agent or office directly. When you plan to negotiate with the IRS, it is important to take certain steps to prepare. Some tips for the process include:

1. Gathering documentation: Before you contact the IRS, be sure you have the necessary financial information and tax documents on hand. This documentation may need to prove your income, show your expenses, and outline your assets. You may also have to prove other things, such as a natural disaster’s effect on you or a medical emergency.The documents you need will depend on the kind of relief you are requesting and why. Negotiations go more smoothly when you have clear and reliable records.
2. Communicate clearly and respectfully: When interacting with the IRS, be honest and civil. Focus on communicativeness rather than aggression. Be honest about your financial or personal situation without overexplaining. Don’t promise the IRS more than you are capable of paying.
3. Get a tax professional: It is often helpful to hire an IRS tactics lawyer in Jacksonville to help you negotiate with the IRS. This is especially true if you have substantial tax debt, are actively facing collection actions, or other complex circumstances.

An attorney helps you gather the right information and documentation while also discussing the debt with the IRS agent for you. It is often much easier to secure the ideal resolution for your tax negotiation case with the support of an attorney.

FAQs About Negotiating With the IRS

Is It Possible to Negotiate With the IRS?

Yes, it can be possible to negotiate with the IRS regarding your tax debt, although if you are able to pay your tax debt in full, the IRS expects you to. If you would be unable to meet your reasonable needs by paying the IRS the full debt, the agency is open to negotiations. It is much easier to navigate these negotiations when you hire a debt settlement attorney to represent you and your interests.

What Is the IRS One-Time Forgiveness?

IRS one-time forgiveness refers to first-time penalty abatement, or a method where taxpayers can remove certain penalties and interest if they have a good history of tax compliance and meet other qualifications. One-time forgiveness does not apply to the principal tax debt you owe, only to penalties. It also only applies to specific penalties, like failure to file or information return penalties.

How Much Should You Offer the IRS in a Settlement?

The amount you should offer to the IRS in a settlement for an offer in compromise depends on your financial situation. The IRS will likely accept an offer for what it reasonably thinks it can expect to collect from you, and what you can pay based on your expenses, income, and other financial circumstances. Be aware that if the IRS accepts the agreement, you must pay it, or risk other consequences. Make sure you offer an amount you can pay.

How Can You Get Your IRS Bill Reduced?

You might be able to get your IRS bill reduced if you qualify for penalty abatement, innocent spouse relief, or an offer in compromise. However, you have to meet specific qualifications for each type of debt reduction. This may include having a reasonable cause that prevented you from paying your taxes, or being unable to repay the IRS the entire debt without causing severe financial hardship. In general, the IRS expects you to pay the full bill if you can.

Hire an IRS Tactics Lawyer With TaxSmith, LLC

Negotiating your tax debt with the IRS can be overwhelming, but it is possible. When you work with the skilled team at TaxSmith, LLC, we offer transparent and exceptional legal representation and guidance. We have more than a decade of experience in tax law and understand IRS tactics.

Our team can review your case to determine what settlement options you qualify for and which one is most useful for you. We know that IRS tax debt can put individuals and families in serious financial circumstances, and we want to help you find the ideal resolution. Reach out to TaxSmith, LLC, today.