How to Settle with the IRS by Yourself

Few scenarios strike fear into our hearts as taxpayers. For example, owing money to the ominous IRS. Just seeing that letter full of legalese and deadlines sends shivers down your spine.

With hefty sums plus accruing penalties and interest at stake, the instinct often involves paying whatever is necessary to make it disappear. But handing over your life savings or panicking into bankruptcy seems pretty extreme for what’s likely an honest mistake.

So before freaking out or draining your kid’s college fund, let me walk you through smarter steps for taking control of IRS settlements yourself to resolve tax debts while keeping your financial life intact.

Navigating IRS Debt? How to Take Control of Your Tax Settlement

Let’s walk through the process step by step, breaking down each stage in simple terms.

Open Your Tax Tab

So, have you received that intimidating letter from the IRS? Take a breath. Then, start by rounding up all your tax papers –we’re talking W-2s, 1099s, etc. Lay it all out like pieces of a puzzle.

Now, let’s identify the specific taxes, penalties, and interest you owe. Yes, you’ll need clarity on what precisely the damage includes, both actual tax owed and tacked-on penalties and fees.

So brew a calming cup of tea, and let’s break this down.

Core Tax Amount Due – The base amount you failed to pay correctly based on income, deductions, etc.
Penalties – Extra charges for things like filing late, underpaying, or other infractions. Common penalty types include failure-to-file, failure-to-pay, and accuracy penalties.
Interest – Daily accumulating interest starting from when tax was originally due, similar to credit card APR. This gets pricey fast.

Tally each component so you understand what the IRS wants and why those stomach-churning totals seem so steep. Simply ignoring scary notices without reviewing specifics helps nobody.

Verifying Your Tax Returns

Now, it’s wise to double-check your past annual tax returns to confirm reported income, deductions taken, etc., and to ensure they align with IRS records. After all, mistakes triggering these debts likely lurked in those documents. You will never know unless you double-check.

Skim through looking for any glaring errors, including:

Unreported or misclassified income
Incorrect credits claimed
Miscalculated deductions
Multiple businesses/earnings tallied incorrectly
Math miscues when totaling
Wrong bank details when receiving refunds

Pinpoint discrepancies that spawned the debt to provide you with critical clarity for remedying current issues and avoiding repeats down the road.

Contact the IRS

Now is the time to contact the IRS to have a thoughtful discussion about your situation. Refer to the number on your IRS notice, punch it in, and call. Remember, they’re humans, too.

Explain your circumstances openly while expressing your desire to resolve this responsibly. A friendly tone can go a long way in softening the conversation.

Verify the Debt Amount

Before agreeing to anything, kindly request clarification on the specifics to ensure you fully comprehend the situation. You simply want to verify the details, so ask for a breakdown.

Ensure the IRS has the correct info about your tax liability. It’s like double-checking the bill at a restaurant – you want to ensure you’re paying for what you actually ordered.

Get on Installment Agreements as You Explore Payment Options

It’s time to talk business. Discuss flexible installment plans that could realistically work within your budget. Appeal to their sense of empathy when negotiating a gradual payment schedule to alleviate this burden for both sides. This is one of the most feasible paths to relieving tax burdens for yourselves, which involves setting up multi-year installment plans that incrementally pay off balances.

Demonstrate good faith by chipping away debts as finances reasonably allow. You’ll show responsibility without unrealistic bank-breaking burdens.

Discuss options for paying off the debt over time and find a monthly payment plan that won’t make your wallet cry. The IRS is more open to working with you than you might think. The IRS offers varied repayment track options.

Short-term payment plan – Pay off balance under 120 days
Regular monthly plan – Fixed payments over three to six years
Partial pay installment agreement – Smaller payments depending on income

While penalties and interest continue accruing amidst installment plans, you should prioritize avoiding feared asset seizures or other aggressive collection actions.

Attempt the OIC Route

Are you feeling the financial squeeze? See if you qualify for an Offer in Compromise (OIC). If installment chunks still prove unaffordable, propose an IRS Offer in Compromise (OIC) for a lesser settlement amount to give you some debt relief. It’s like making a deal – you pay a reduced amount, and they consider the debt settled.

However, your qualification will stay strict based on rigorous financial background checks confirming no reasonable ability to pay full balances.

You’ll have to bear soul and bank accounts substantiating hardships preventing tax obligations from realistically getting squared away. Offers under $10,000 at least warrant IRS consideration, provided your evidence proves convincing.

Just know that approval rates average around 36%, so expectations need realistic alignment. Complete the necessary forms, gather supporting docs, and submit them. It’s your chance to find a middle ground. Thorough applications make air-tight cases essential.

Seeking Temporary Relief

Many times, life will throw you curveballs. Same with settling the IRS. If you’re facing a financial storm, request a temporary delay. Provide evidence of your situation, and the IRS might give you a breather.

Request a temporary suspension on IRS collection to buy yourself time. You’ll avoid immediate actions like wage garnishments before funds free up.

You’ll generally need to demonstrate fixed future income sources, opening doors soon covering past tax debts. The IRS may grant grace periods of a couple of months, allowing recent developments to improve financial pictures and help resolve overdue amounts.

But unless the confirmed money starts pouring in soon, interest and penalties continue tallying, often minimizing pauses’ practical impact. So don’t bank on the pardon lasting forever.

Pleading Financial Hardship

Are you a taxpayer enduring extenuating circumstances severely limiting the ability to pay taxes owed? Pleading economic hardship to the IRS may open assistance doors if sufficiently evidenced.

Demonstrating below-standard living conditions and making further payment burdens detrimental to health and welfare can inspire IRS flexibility, especially for unemployed, elderly, or disabled individuals.

It may require substantiating details like impending evictions, medical bankruptcies, or reliance on public assistance to warrant consideration. So prepare to bear tough times ahead if hoping for help with hardship.

Penalty Relief Requests

Nobody likes penalties. If you think they’re unjust, speak up and ask for a penalty relief. Request the removal of penalties by explaining your situation.

If you can demonstrate reasonable cause behind filing/paying mistakes beyond control, requesting penalty abatement will hopefully lift these unfair fines. Write a heartfelt request, attach supporting documents, and let them know why you deserve a break. After all, the IRS understands life happens.

Arguments that can warrant relief hardship claims include health issues, deaths in the family, military service, fires, theft, etc. They’ll validate accidental non-compliance, not willful negligence, behind overdue tax violations.

When evidence proves legitimate, the IRS commonly rescinds associated penalty portions of debt. But interest owed keeps right on growing.

Interest Accrual 101

Is the interest piling up like dirty laundry? Understand the rules of interest abatement. If you have a good reason, let them know. Request relief and see if they cut you some slack.

Speaking of menacing interest applications, it’s important to grasp the mechanics spurring its daily accumulation. IRS underpayment interest compounds are based on fixed quarterly rates, which frequent tax rule changes do alter. For 2023, it equals 8%. So weekly interest tallies keep swelling debts based on the following;

Outstanding Balance Owed X Quarterly Interest Rate ÷ Number of Days in Quarter = Daily Interest

See how quickly even tiny balances balloon when untouched for months/years?

Currently Not Collectible Status

If paying feels impossible, let them know. It’s time to request a Currently Not Collectible (CNC) status. It’s like pressing pause on the debt collectors. Provide proof of your financial struggles, and the IRS might ease off for a while.

By verifying the genuine inability to cover past taxes owed presently through documentation like bank statements and pay stubs, CNC designation prevents the seizure of assets or garnishing wages during hardship.

Down the road, when earnings increase reasonably affording tax obligations meeting, the IRS reinstates collection. So it buys time, yet interest continues to accumulate.

Innocent Spouse Relief

Relationships are complicated, even with the IRS. Claim Innocent Spouse Relief if you’re not responsible for the tax mess. Determine your eligibility, fill out Form 8857, spill the beans, and let the IRS know why you’re not the guilty party.

You can document minimal participation, lack of knowledge, or inability to prevent discovery behind non-compliance, blame, and tax liability lifts.

Victims of spouse abuse or abandonment also get consideration. So don’t silently suffer joint tax fraud implications alone.

Maintain Open Communication

Communication is key. Keep those lines open. If the IRS needs more info, don’t leave them on read. Respond promptly to any requests.

Open communication prevents overdue tax dramas from spiraling into scary legal battles. So inform the IRS of your intent to resolve the debt through reasonable repayment solutions ASAP.

Be the one initiating status updates, payment plan proposals, and compromise offers. The more forthcoming you stay, the greater good faith you perceive for working collaboratively versus combatively.

When corresponding by phone, remain calm and explain challenges straightforwardly. With written letters, mind professional decorum summarizing circumstances clearly without excuses. IRS’s willingness to settle cases largely hinges on taxpayers’ receptivity to tackling matters.

Know Your Rights

When corresponding tax resolutions, understanding the rights legally entitled exercise as a taxpayer prevents perceived intimidation from spiraling situations negatively. You deserve to receive the following:

Professional, courteous service

Proper time addressing disputes

Confidentiality protects sensitive information.

Relief suspending collections if immediate payment imposes undue hardship

Don’t hesitate to assert the above aspects.

Document Everything

Paperwork is your friend. Keep a trail of all your interactions with the IRS. Retain copies of forms, letters, and any supporting documents. You never know when you might need them.

Keep meticulous records of all communications made, repayment plans proposed, compromises offered, and reliefs requested. This will provide paper trails demonstrating good faith efforts in resolving tax debts.

Logged phone conversations, copies of written correspondence, and confirmation emails build evidentiary support defending positions if disputes arise or misinformation circulates.

Appeal for IRS Decisions

Sometimes plans go awry. If your initial request gets the thumbs down, don’t lose hope. Consider the appeals process. Follow the formal appeals dance outlined by the IRS, and you might still come out on top.

If there was no clear explanation, you, as a taxpayer, deserve to appeal these questionable rulings by requesting deeper reviews of qualifying circumstances.

Re-state cases remotivate favorable reconsiderations. Or bring supplemental evidence addressing identified deficiencies upholding initial denials. Don’t accept vague IRS rejections at face value without trying to elevate matters higher for fair re-evaluation first.

Leverage Taxpayer Advocate Service

If feeling overwhelmed, unraveling tax troubles solo, the IRS’ own Taxpayer Advocate Service representing citizens’ best interests often succeeds in unlocking resolution doors, seeming stuck.

These mediators identify procedural snafus or misapplied codes complicating customer cases for streamlined corrections. Overburdened folks might appreciate welcoming assistance.

Be Aware of Deadlines

Time is of the essence. Stay on top of deadlines like your favorite TV show. Missing a deadline can lead to more penalties and interest. Set reminders, stay organized, and avoid unnecessary drama.

Never underestimate the negative domino impact blown deadlines inflict. Missed tax court appearance notices or appeal windows repeatedly rejected offers may eventually trigger unwanted IRS enforcement repossession of assets or garnishing wages, bringing added life complications.

So carefully calendar all relevant dates, holding yourself punctually accountable, and avoid such chaotic scenarios from developing.

Follow Through with Agreements

If the IRS approves your request for an installment payment plan, be sure to diligently follow through on the agreed-upon terms. If you consistently pay your renegotiated tax debts on time, you’ll be demonstrating fiscal accountability and faithfully honoring the arrangement between yourself and the IRS.

Adhering properly to the negotiated schedule for incremental payments over the coming months and years prevents further penalties and communicates integrity. Meeting these revised obligations ensures transparency about your changing financial situation over time.

Seek Professional Assistance if Necessary

If the DIY route feels like wandering through a dense forest, consider a guide. When dealings grow overly intricate, unraveling solo or clarity lacks confidently communicating key positions, now qualified tax pros profess to resolve such situations.

Their expertise navigates nuances, scanning situations with a seasoned perspective and identifying optimal paths to protect finances.

If struggles meeting reasonable expense thresholds surface within settlement quests, assistance programs subsidize costs, making reputable help accessible. Never feel ashamed seeking additional support to achieve better outlooks.

Conclusion

Facing the IRS is no walk in the park, but settling your debt solo is achievable. By understanding your tax situation, communicating openly, and exploring the array of options, you can confidently navigate the IRS landscape. Remember, it’s not just about settling debts; it’s about reclaiming control of your financial narrative.

Does it feel hard doing it by yourself? Seek help from a professional. At Cumberland Law Group, we offer free consultation, and we will help you navigate in settling your IRS debts. Contact us today for an IRS debt settlement consultation to explore the solutions available to you.