Can You Negotiate with the IRS Yourself? How it Can Be Done

Many taxpayers around the U.S. struggle to pay off their tax debts. Millions of individuals owe the IRS money, resulting in around $316 billion in overdue taxes. Tax debt is one of the most common types of liabilities out there, aside from mortgages and loans.

If you struggle to cover your tax obligation, the IRS offers various relief methods, including negotiating a payment plan or an offer in compromise. However, many people may not pursue these avenues because they aren’t aware of them or they don’t think they can negotiate with the IRS directly. 

But there's good news - you can negotiate directly with the IRS. You don't need to pay a pro. In some cases, you should definitely get professional help, but that's always up to you. If you want to take a DIY approach to tax negotiation, you certainly can.

Wondering where to start? This guide provides details on how to settle your tax debts with the IRS by yourself, your legal rights as a taxpayer, how to negotiate IRS tax debt, and the options available to you for resolving them. 

Can you negotiate with the IRS yourself?

Yes, you can negotiate with the IRS on your own. You don't have to hire someone to help you. However, before you start, you should make sure that you understand your tax problem and how to navigate the resolution options. 

As a taxpayer, you’re inundated with ads and messages from companies claiming they can help you negotiate with the IRS. However, depending on your unique situation, you can resolve many types of issues on your own, helping you avoid paying for those services, which can be costly. Some of these companies can create misleading advertisements about programs the IRS has to settle taxes. Most of the time, these are terms the IRS doesn’t use or programs they don’t actually have. Some of the most common are things about the fresh start program (which really isn’t a program and just a change in the law about basic resolutions offered by the IRS), or the IRS one-time forgiveness program (which is a fancy way of saying first-time penalty abatement that is catchy for marketing slogans). 

Tax regulations can be confusing and intimidating. Ultimately, IRS representatives look out for the agency’s best interest, which is collecting the most taxes possible. Additionally, the agency struggles to put any of its letters and instructions in plain English. And those facts can lead to a challenging experience for many taxpayers.

If you want to represent yourself, the first step is to get a sense of the options. 

Options for settling or resolving tax debt

The IRS is most concerned with collecting the money taxpayers owe the agency. Remember that you will typically face fewer consequences if you are open and honest about your situation from the start instead of trying to get away with late payments, failing to pay, or failing to file your return. 

So, how do you negotiate a tax settlement with the IRS? You have a few options for getting your tax debt resolved or settled. You can then get back on good terms with the IRS and stay compliant, even if it means you pay smaller amounts over time. Here are relief options to research and consider for your situation:

Payment plan

You can request to set up a payment plan with the IRS on your own. Also known as installment agreements, these plans allow taxpayers to pay off their tax debt over a set period of time. The different types of installment agreements are as follows:

• Guaranteed: This plan is usually the simplest option. To qualify, you can only owe $10,000 or less, and the debt must be paid off within three years or by the collection statute expiration date (CSED), whichever is first.
• Partial payment: A partial payment installment agreement (PPIA) is used when a taxpayer cannot make the minimum monthly payment in a regular installment agreement. If you get approved for a PPIA, you can instead make affordable payments, and you may end up paying a lower balance than you owe when all is said and done. With PPIAs, the IRS writes off any remaining debt once the collection statute expires.
• Direct debit: With this plan, you make payments through direct debit from your bank account. Individuals with balances over $25,000 who establish an online payment plan must do direct debit, and the same for businesses with over $10,000 in debt.
• Streamlined: If your balance is under $50,000, you could be able to do the streamlined version of the installment agreement. This plan doesn’t require you to provide a collection income statement, and debts must be paid off within 72 months or by the CSED.
• Non-streamlined: These agreements can give you longer terms for repayment. They previously required taxpayers with under $250,000 in taxes owed to have to provide a collection information statement, but that is typically no longer required unless your debt is seriously delinquent or a revenue officer requests one. The IRS may file a lien against you. 
• Financially verified: For individuals and businesses owing $250,000 or above to the IRS, they would apply for a financially verified installment agreement and provide a collection information statement to disclose their financial information. 

The amount of debt you have, whether you’re an individual or a business, and your income situation will all impact the type of installment agreement you apply and qualify for. The good news is that you have options, so carefully consider your biggest challenges and priorities when looking through eligibility requirements and the pros and cons of each plan.

Offer in compromise

Don't think you can afford monthly payments? Trying to figure out if you can pay your tax debt off for less than you owe? Then, you may want to look into an offer in compromise. 

An offer in compromise essentially allows you to settle what you owe at a lower amount. In this way, you can settle IRS debt for less, which ends up being a big benefit if you’re dealing with financial difficulties. You send an initial payment amount, or offer, with the applicable tax form (433-A, 433-B, or 656), along with the $205 application fee.

You may be eligible if your circumstances don’t allow you to pay your full tax bill because of a proven financial hardship. The IRS considers your ability to pay, income, expenses, and asset equity when deciding. If they believe that the offer you provide is the most they can expect to collect, they will likely approve it.

You also must meet these requirements to qualify for an offer in compromise:

• You have filed all required tax returns and made estimated tax payments.
• You are not involved in an open bankruptcy proceeding.
• You have a valid current-year return extension or have already filed for the year.
• You are an employer that made tax deposits for the current and last two quarters.

If the IRS finds that you don’t qualify, they’ll return the application fee you paid and apply the payment you sent to the balance you owe.

You can apply for an offer in compromise on your own, but be aware that acceptance rates are low. By working with an experienced pro, you may increase your chances of getting your offer accepted.

Currently not collectible

You may be able to delay IRS collection when you’re unable to pay what you owe. If your financial situation doesn’t allow you to pay right now, the IRS may put your account into currently not collectible (CNC) status, which means they will temporarily cease trying to collect from you. 

However, you will eventually have to pay your debt when your finances improve. Your balance will also accrue interest and potential penalties. If your finances don't improve, the IRS will no longer be able to collect the debt after the collection statute expiration date. Thus, the debt will effectively be forgiven.

The IRS may require Form 433-F, Collection Information Statement, and evidence of your financial situation to mark your account CNC.

First-time penalty abatement

When you’re hit with penalties because of your failure to file, failure to pay, or failure to deposit, you can apply for first-time penalty abatement. This option waives fees related to these penalties, not the amount you may owe related to them. 

You have to be in good standing with the IRS, meaning you have complied previously. The IRS defines good tax compliance as having filed the same type of return for the last three years, if required, and not receiving any penalties during those same three years.

Applying for abatement is usually simple. Carefully review the IRS notice you received about the penalty, and contact the IRS at the phone number on the document. You shouldn’t have to provide any documentation to support your request if you are in good standing.

Bankruptcy

Another option when you’re unable to pay tax debts is bankruptcy. However, in many cases, you may still be required to pay what you owe the IRS unless you can show that the debts occurred because of tax fraud or mistakes.

With a Chapter 7 bankruptcy, only federal or state income tax debt can be discharged, and in a Chapter 13 filing, you can set up a repayment plan to get your debts paid off. The IRS states that in Chapter 13 cases, you must file all required returns and pay taxes during the bankruptcy to avoid having your case dismissed.

Waiting for the statute of limitations expiration

The IRS will forgive tax debt after 10 years have passed. At that point, the agency will deem the outstanding debt as uncollectible. So, theoretically, you could wait out the IRS, but that's not simple. If you have a job, open a bank account, buy property, or take many other actions, the IRS will easily be able to find you.

However, CNC status could allow you to keep the IRS from trying to collect until you reach the statute expiration date. Note that some situations, like filing for bankruptcy or applying for an offer in compromise, could extend the statute of limitations for a certain amount of time.

When can you negotiate with the IRS on your own?

Certain situations are easier to handle on your own than others. The more complicated your situation is, the greater the likelihood that you’ll need expert help. However, these common examples show situations where you can likely negotiate on your own:

• Basic installment plan: If you’re struggling to pay your full tax bill by the deadline, you may qualify to apply for an installment plan online. This is usually a simple process that you can handle on your own. If you owe less than $50,000, you can apply online.
• You have low balances owed: You may have just a couple of unfiled returns, and the balance you carry is pretty low. In this situation, you can file your late returns and then try to work out a payment plan with the remaining debt balance.
• It’s your first tax issue: Remember that one way to get relief is to apply for first-time penalty abatement, which you may qualify for if you haven’t filed or paid late in the last three tax years. Abatement may allow you to be forgiven of penalties.
• You are normally compliant but experienced a sudden life change: Applying for a CNC or offer in compromise is typically more effective with the help of a professional, but when your circumstances change suddenly, such as if your income drops, you can apply on your own. If you’re a strong candidate and you pay close attention to all guidelines, you could save thousands by handling it on your own.

Navigating different debt scenarios and IRS options isn’t always easy, but these examples show common issues that you can tackle yourself. Do plenty of research, follow all laws and guidelines, and be communicative and open with the IRS through it all.

When to hire a tax professional

While you can handle many tax issues on your own and represent yourself, in certain situations, you need professional help. You never want to risk getting in deeper trouble with the IRS or taking a costly misstep. 

Some IRS notices are straightforward, and you can contact the agency via the phone number provided to resolve the issue, or send in the documentation they requested. However, if you have received multiple notices or are facing serious fines or legal repercussions, always talk through the matter with an experienced professional.

You may also want to hire outside help if you want to appeal a collection action. Using Form 9423, you can appeal a wide range of collection actions, and during the appeal, you can suggest alternatives. For instance, if the IRS wants to garnish your wages, you can appeal and request a payment plan. If you're comfortable, you can appeal on your own, but if you're at the last stage of the appeals process, you should definitely consider hiring a professional. 

Also, hire a professional when you’re not sure about your options. They can help you file for relief options, and they know how to settle debt with the IRS. If you got hit with a tax penalty or you’re having trouble coming up with the funds to pay your bill, you may not fully understand which relief option is right for you. A tax expert can examine your situation and advise you on the best step forward. When you give them power of attorney, they can negotiate with the IRS on your behalf.

How to Settle With the IRS by Yourself

To settle with the IRS on your own, review the options. Then, decide on the best option based on how much you owe and how much you can afford to pay. 

For example, if you owe less than $50,000 and can afford to pay off the debt in monthly installments over six years, you should get online and apply for an installment agreement. If you can only afford a small monthly payment, you may want to apply for a PPIA. If you can pay a lump sum but not the whole balance, you may want to look into an offer in compromise. 

Once you've selected an option, review the paperwork carefully. If you're applying for a settlement, you will have to provide the IRS with detailed financial information. Gather details about your income, assets, debts, and expenses to complete the paperwork. 

Keep in mind that the IRS wants to collect as much as you can possibly pay. The agency will only consider "essential" expenses when reviewing your application. For example, expensive car loans and private school tuition are not considered essential expenses by the IRS. Additionally, the agency has strict limits on how much it believes taxpayers should spend on housing, food, clothing, transportation, utilities, etc.

If you have any expenses over the IRS's limits, be prepared to mount a defense. For example, say that your monthly energy bills are higher than the IRS's limits, but that's because you run critical medical equipment in your home. That's something you should be prepared to share with the IRS. 

Finally, remember that you can appeal. If the IRS says no to your settlement offer, figure out why. Then, appeal the decision, but make sure you present new info to support your side of the story. Also, keep a close eye on deadlines. The IRS has strict timelines for the appeals process.

FAQs

Here are some FAQs about negotiating with the IRS on your own.

Can I negotiate with the IRS myself?

Yes, by law, you have a right to negotiate directly with the IRS and the state tax agencies. You are never obligated to hire a tax pro. However, you should take a DIY approach cautiously. With criminal tax issues, complicated tax issues, or high amounts of tax debt, you should work with a tax professional.

How do you negotiate a tax settlement with the IRS?

To settle your taxes for less than you owe, you must provide the IRS with detailed info about your tax return. You also need to explain extenuating circumstances. If you make a solid case, you may be able to convince the agency to settle your taxes for less than you owe.

Can you settle IRS debt for less?

If you meet certain requirements, you may be able to settle your tax debt for less than you owe. You must prove that you're paying the most possible. You also must be up to date on filing your tax returns and paying current taxes.

How TaxCure can help

Sometimes you may simply need more resources to research your tax situation. At TaxCure, we provide many detailed guides to help you research resolution options for a range of tax problems. You can read up and take a DIY approach, or you can do some preliminary research to ensure you're a well-informed consumer when you contact a professional.

Want to find professional help now? Gain access to the largest network of tax resolution professionals in the country with TaxCure. We make the search process fast and easy so you can find guidance customized to your problem and location.

To get help now, use TaxCure to search for a licensed tax pro in your area. Then, narrow down your search based on the problem you're having or the solution you want. Once you have a list of options, narrow it down even further by reading reviews and profiles. Then, contact a tax pro for a consultation.