When facing tax debt, dealing with the IRS can be a frightening, intimidating experience. Individuals and businesses alike might be afraid to shine any sort of spotlight on their finances for fear of making things worse. Fortunately, the IRS has numerous options for debt settlement at their disposal. One such option is called an “offer in compromise.”
Essentially, offers in compromise are negotiations where the taxpayer offers to pay a portion of the debt in an effort to satisfy the entire debt. While the prospect of negotiating with the IRS might seem intimidating enough, there are two common myths that people must keep in mind.
- It’s too good to be true: Many people learn about an offer in compromise and immediately believe that their problems are over. Unfortunately, that’s a myth. While the program does exist, it usually comes with some strings attached. Once the settlement amount is ultimately reached, the IRS might also write your upcoming tax refunds into the agreement or state that the compromise is void if you fail to file taxes for the next five years.
- The best plan is to be a ruthless negotiator: Unfortunately, individuals become seduced by negotiating tactics they’ve seen in popular media. Books, movies and television shows popularize tough negotiating strategies that are designed to win at all costs. An offer in compromise is a negotiation that must be approached more artfully. While there is no one-size-fits-all percentage, the IRS will generally rely on a formula to determine how much of the settlement they are willing to write off. It is better to remain flexible and be willing to truly negotiate a settlement.
It is imperative that you work with an experienced tax law professional who will thoroughly examine your situation and provide skilled guidance. Negotiations with the IRS are best left to the professionals who understand the entire process and who can work as a team to reach the best solution possible for your tax debt.