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Is It Really Possible To Get The IRS To Discount Your Tax Debt?


If you watch cable news, you have undoubtedly seen the ads promoting firms that offer to settle your IRS debt at huge discounts.  The nation’s largest tax resolution firm, Tax Masters, is now being sued by the states of Texas and Minnesota for deceptive practices.  In the below video, ABC’s Nightline does a great job of really exposing some serious issues with this company.

Is It Possible To Get A Payment Plan With the IRS?

I think Brian Ross does a great job and is one of my favorite investigative reporters.  Unfortunately, as is almost always the case with these kinds of reports, the story lacks some important details.

Regardless of what you think of Tax Masters’ practices, there is a legitimate process that you can pursue to negotiate a settlement with the IRS.  You can contact the IRS directly and apply for a payment plan.  If the amount you owe is less than $10,000 you will likely get approved to make payments over a period of up to 5 years.  If you don’t feel comfortable approaching the IRS on your own, there are thousands of honest accountants nationwide that can assist you for hundreds not thousands of dollars.

Details on the IRS debt settlement program:

IRS Offer In Compromise

Details on applying for an IRS payment plan:

IRS Payment Plans

Will The IRS Discount Your Tax Debt?

If you truly have a financial hardship and cannot pay your tax debt, the IRS will consider a reduced settlement with you (known as an offer in compromise).  There are a lot of forms to fill out and I would not recommend attempting this on your own.  For most tax situations, you should be able to hire a local CPA to assist you for a few hundred dollars.  I have steered many individuals in this direction over the years and have seen the process work.  The IRS will make reasonable concessions that may include reducing or eliminating late penalties and interest, or even discounting the actual amount of your tax liability.  If you have minimal assets and do not have the ability to make payments, your tax debt may even be deemed uncollectible.  This will provide you with relief from IRS collections for a period of time (usually one to two years).

The key concept to grasp here is that you must be able to demonstrate a financial hardship.  If you have a lot of assets and a good income, don’t expect the IRS to offer too many concessions.  This is the part that the national tax settlement firms seem to forget to mention. 

Tax Masters buys an enormous amount of advertising, which is probably why we don’t see many of the cable networks doing investigative reports like Nightline.  The important thing for consumers to understand is that although there are a few companies gouging their clients, the concept of IRS debt settlement is legitimate and there are plenty of reputable firms that can provide assistance for a reasonable fee.

If you have had an experience negotiating a debt with the IRS, please share your thoughts and advice in the comments section below.  Additionally, we offer an inexpensive e Book that covers IRS debt settlement in our online store.

Helping you make the most of God’s money!

James L. Paris
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