You’re not stuck. That’s the first thing you need to know if you owe back taxes to the IRS. The agency actually has several programs that let taxpayers negotiate their obligations, and they’re designed for people who can’t write a check for the full amount tomorrow. Whether you owe $5,000 or $50,000, there are paths forward.
What Does It Mean to Negotiate with the IRS?
Let’s be clear about what negotiation means here. You can’t haggle over the actual tax you owe. That number is what it is based on your income and deductions. But how do you pay for it? That’s negotiable. When do you pay it? Also negotiable. And in some situations, whether you pay the full amount? That can be negotiated, too.
The IRS would rather collect something than nothing. Simple as that. This reality creates opportunities for taxpayers who genuinely can’t afford to pay everything at once. At Gudeman & Associates, P.C., we help clients across Michigan figure out which approach makes the most sense for their situation.
Installment Agreements Allow Monthly Payments
Most people negotiate their back taxes through installment agreements. Think of it as a payment plan. Instead of paying everything now, you pay it off in monthly chunks over time.
The IRS offers different types of plans:
- Short-term payment plans if you can pay within 180 days and owe less than $100,000
- Long-term payment plans stretching up to 72 months for people who qualify
- Partial payment installment agreements when you won’t be able to pay the full amount before the collection deadline expires
If your debt is relatively small, you might set up a plan online without much hassle. Larger amounts get complicated fast. That’s when working with a Troy tax lawyer makes sense. We can negotiate terms that actually fit your budget instead of terms that look good on paper but wreck your finances in practice.
Offers in Compromise Settle for Less
An offer in compromise lets you settle your tax debt for less than what you owe. Sounds great, right? It can be. But the IRS doesn’t hand these out freely.
They’ll only accept an offer when they believe it’s the most they can realistically collect from you. The agency looks at everything. Your income, your monthly expenses, the assets you own, and your future earning potential. You’ve got to prove that paying the full amount would genuinely cause financial hardship or that there’s legitimate doubt about whether you actually owe the entire sum.
Here’s what trips people up. Many taxpayers apply for an OIC on their own and get rejected because they didn’t present their case correctly. The financial disclosure forms are detailed and unforgiving. One mistake in how you report your expenses or assets can sink your application.
Penalty Abatement Reduces What You Owe
While the base tax amount usually won’t budge, penalties are a different story. You can often get these reduced or wiped out completely.
The IRS charges penalties for filing late, paying late, and making mistakes on your returns. These penalties compound quickly and can add thousands to your balance. First-time penalty abatement works if you’ve got a clean compliance history for the past three years. You can also request relief based on reasonable cause. Serious illness. Natural disaster. Bad advice from a tax professional. These can all be grounds for penalty relief.
Interest is harder to eliminate. The IRS rarely waives it. But getting penalties removed still makes a real difference in what you owe overall.
Currently Not Collectible Status Provides Temporary Relief
There are times when you’re in dire financial straits, and choosing to pay your debts means that there won’t be any available funds for rent or groceries. Fortunately, the IRS is willing to work with you during these times. By marking your account with “non-collectible” status, the IRS can temporarily halt all collection efforts.
There’s a catch, though. Interest and penalties keep adding up even while collection is paused. And the IRS will check in periodically to see if your situation has improved. When it does, they’ll start collecting again. A Troy tax lawyer can help you document your financial circumstances properly and make the case for CNC status when it’s appropriate.
When You Should Get Professional Help
The IRS has procedures. That doesn’t mean those procedures are easy to understand or that applying the right one to your situation is obvious. Mistakes cost you time and money. Getting rejected because you filled out forms incorrectly or chose the wrong negotiation strategy just extends your stress.
We work with people and businesses facing tax debt throughout Michigan. Our approach starts with understanding your complete financial picture, then figuring out which negotiation strategies are actually realistic for your case. We present your situation in the strongest possible way. If you’re dealing with back taxes and don’t know where to start, reach out. We’ll help you develop a plan that gets you moving toward resolution instead of staying stuck.
