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How to Resolve Tax Debt with the IRS

By October 4, 2021IRS, Tax Strategy, Taxes

My wish for the world would be to pay the least amount as possible for taxes, always on time, and not have any debt whatsoever. However, reality looks a little different. One thing we’ve learned from this pandemic is circumstances can change in an instant. Entire industries can be shut down at the snap of a finger. Revenue can get chopped by over half overnight. You’ve lived through it, so you know what it’s like. Then it’s not hard to fathom you might have found yourself in debt to the IRS. It may feel unbearable and like all is lost, but I promise, there is a way out from under their thumb. You need to know how to resolve tax debt with the IRS.


What to Expect when Resolving your Tax Debt


I’ll take you through the tax resolution process we use at Incite Tax, which is based on collaboration and years of experience from all of our tax professionals. Sure, almost anything these days can be DIYed, but when dealing with the IRS, it’s not recommended.


This will sound harsh, but the IRS are manipulative bullies. Don’t let them take advantage of you! Use a professional that knows how to stand up to them. With that in mind, we’ll go through the process with the assumption we’ve had the initial consultation to go over your situation, made sure we are a good fit, and you have signed our engagement letter to contract with us for our services.


When someone comes to us looking to know how to resolve tax debt, they generally have 2 main questions from the start… can they settle for less than they owe and how long is it going to take? Valid questions. It would be awesome to call up the IRS and then the next day have them dismiss your debt, so you pay nothing. Not a chance!


Right from the start it’s important to understand this will take a long time. It may feel like an extremely long time. Some issues take months to resolve and some a year or longer.


Dealing with the IRS sucks in normal circumstances, so this process will be no different. The silver lining here is if you use a professional like Incite, you generally won’t have to meet or speak with the IRS. We do all the dirty work for you.


Beginning the Process


The first big step is for us to file a Power of Attorney (POA) with the IRS. If you have any issues with state taxes, a separate POA is required for each state you need a resolution with. This should provide some immediate relief because at this point the IRS is required to contact your professional. If for some reason they do contact you, because they are sneaky like that, all you have to do is politely request they contact us and then give them our contact info. That’s it. No matter what they say, or what they ask, the answer is to contact us.


Next, you’ll be assigned a case manager. All of our case managers are Certified Public Accountants (CPA). Your licensed professional will work with you to develop a phased strategy for resolving your case and advise you on what steps to take for the most effective resolution. You’ll have access by phone and email for any needs that arise. In person meetings also work if that’s your preference.


At Incite, you’ll have the added benefit of experienced technical specialists and admin staff that support your case manager, and they will keep you informed through the entire process. Our team becomes your team!


IRS & Client Expectations


Generally, as far as the IRS is concerned, you need to become a compliant taxpayer before they’ll even consider starting the negotiation process to reach any kind of settlement. Compliance means that all past due delinquent income tax returns must be prepared and filed. Compliance also involves being current on quarterly estimated income tax payments and withholding at the correct rate if you are a wage earner as well. Your case manager will know what needs done based on your unique situation. Don’t worry if you can’t find all the records that are needed for compliance. We’ve developed methods that are in accordance with regulations for completing tax preparations in order to get them filed quickly.


Just because you might not have all your documents, doesn’t mean you don’t have any responsibilities. The sooner you want this resolved, the sooner you should get back to us with any request. Communication is key! It’s important that you and your professional view this IRS resolution process as a collaborative project. Cooperate with each other. Work hard together. Timely follow through on both our parts will keep the process moving forward.


Negotiation to Resolution


Once you are a compliant taxpayer it’s time to work with your case manager to come up with a plan of resolution you can live with and see through to acceptance. Then we’ll propose that plan to the IRS. This is where full on negotiations begin. We pride ourselves on obtaining the lowest settlement possible under the law for our clients. Unfortunately knowing the IRS, it’s rare that a proposal is accepted on the first try. That’s just how negotiations work. However, your case manager is extremely diligent and persistent in following up with the IRS to provide information if needed, respond to their counter proposal ideas, and sometimes, just to light a fire underneath them.


Once all the back and forth is done, the IRS will send their official resolution, which your pro will review. If it meets what you and your professional agreed upon at the beginning or is close enough to be satisfied with then that process is done, and you have your plan on how to resolve tax debt with the IRS. If it doesn’t reflect what was agreed to, then your pro will insist that it be changed. The IRS can be stubborn and if they are completely unwilling to change any more, then you’ll be advised on options for the next step. Then once the final resolution is agreed upon by you, your pro, and the IRS, your professional will advise you on how to succeed with your resolution and how to avoid future tax problems.


As stated in the beginning, this is not a DIY type of thing and hopefully you can see why. You need someone who knows tax regulations, has experience dealing with the IRS and who’s not intimidated by them.


If for some reason you are still thinking you might do this on your own, in the very least please contact us here at Incite for an initial free consultation. (And plan on wasting a lot of time on hold with the IRS. Seriously, and you thought other government agencies were bad.) At this meeting, an experienced tax resolution CPA will evaluate your situation and discuss all available options for resolving your matter. Bring all recent notices and correspondence from the IRS to the meeting to increase the likelihood of determining a course of action on how to resolve tax debt within this first consultation.


Schedule your Confidential, No Obligation FREE Evaluation.


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