Tips for Negotiating with the IRS

Okay, the worst has happened. Whether it is because of your own fault or some fickle circumstance, you owe the IRS money on previous years income. Instead of spending sleepless nights and anxious days worrying about it, tackle the problem head on, and show yourself willing to be an active partner in finding a solution to pay the back taxes. A few tips will help to take a proactive role instead of feeling like a passive victim of the tax system.

Be prepared

Put together your records in an organized and coherent package that allows you to provide the information as needed. You should have tax forms for the year in question, as well as receipts or supporting data.

Get a hold on penalties and interest

One of your first orders of business with the IRS agent is to get an abatement of the penalties and interest that are accruing as you go through the process of investigation and resolution. This action will stop the clock on additional costs beyond the actual amount you owe the government.

Be honest

Always provide all the information as the agent requests. Be honest in your answers to questions and avoid the tendency to hide information. On the other hand, say as little as possible. You are not required to offer any other information than what is requested to clarify the case at hand. Limit your answers and information strictly to whatever matter is in dispute.

Work out a payment plan

Be realistic in what you can afford to pay. If your current financial situation will not allow you to make payment, see if the agent can hold off payments until a later date. Be aware that the IRS’s willingness to work out a payment plan for you depends on your current taxes being paid. Ensure that you pay as required and on time. The IRS can revoke a payment plan if you fail to file returns or pay taxes after the payment agreement was made, if you miss a payment or if the agency discovers that you have been untruthful on your financial condition. If your financial condition changes significantly, getting either better or worse, notify them of the change.

Seek professional help

If you begin to feel over-your-head in the discussion, don’t follow what’s going on, or feel you are being treated unfairly, stop the negotiation so that you can call in a tax professional to help you negotiate. An accountant or a tax attorney may be necessary to safeguard your financial interests if the IRS is not being realistic on your ability to pay back the taxes that are in arrears. Though hiring a professional costs you money, it will save money in the long run.