Settling with the IRS

[Playa]

I hear all of these commercials about settling your tax bill for pennies on the dollar. But most of those are for $10,000 +.
We still owe < $1000 from 2012, and another $1000 looming on the horizon for 2013.

Anyone have any luck or know tried and true techniques for settling the bill for less than the stated amount owed? Without having to use one of the Tax Settlement Services?

[Atfulldraw]

They (the IRS) will be glad to talk to you about it

Most likely though, at those amounts, what they are going to want is a payment plan.
Which isn't such a bad thing....they may forgive some penalties and interest if you ask them.

[WTN]

Why not just pay it?

[super_dave]

I used their payment plan for a filing mishap 3 years ago. I told them what my budget would allow and they gladly agreed. I don't know if I lose any refund or if it goes straight to them now, but either way, they will get it

[Nelson]

CPA CPA CPA! I have been down that road.

[tef]

I agree with WTN, why not just pay it? Not to sound rude, but you kind of knew you were going to owe taxes, so check into increasing your withholdings or make less money,lol.

[LWD]

Several points.

1) Very few people can actually qualify to pay pennies on the dollar. If you can, it means you have no assets and virtually no income.

2) If you're in a payment plan, you're still accruing failure to pay and interest on the monies owed. IIRC the effective interest rate considering the failure to pay penalty is something like 15% on the balance. That's expensive.

3) Most of the tax services you hear advertised are charlatans. You can get a CPA to do better work for less money. Most of them employee only enrolled agents, the lowest form of license to practice before the IRS. CPAs and attorneys with tax experience are far better qualified and educated. Most of these services won't talk to you unless they're going to get a several thousand dollar at least fee from you. A CPA even at $200 an hour, which is high, will likely be much less. They are preying on your fear and desperation.

4) What you really need is someone who speaks the IRS language and can call BS on what they say. Many IRS employees have given them the reputation for less than honest and forthright dealing because they've been, well, less than honest and forthright in their dealings with taxpayers.

5) If you only owe a couple of grand, just pay it as fast as you can borrowing to do so if necessary.

6) Do not ignore the problem. The IRS can mess you up. They will levy your bank accounts and attach your paychecks.

7) If you owe a lot, then bankruptcy can be a viable option. Occasionally tax is dischargeable. Interest and penalties almost always are dischargeable. Bankruptcy can force the IRS to accept a longer payout timeframe than they would under their rules.

8) If the IRS employee ever shows you a gold badge and/or identifies himself as from IRS—CI or criminal investigation, immediately invoke your right to remain silent and call a federal criminal lawyer.

PM me if you have more questions.

LWD

[lameduck]

Most working people pay what they owe and move on.At least that's what I've done my whole life.

[Thumper]

The IRS sent me a bill for $275 plus $135 for interest and penalties. Sent the "proper" documentation showing I didn't owe the $275, they agreed, but said I still owed the $135 in interest and penalties because the $275 was a valid tax debt owed until I filed an amended return with the "proper" documentation. I just paid it and went on about my business.

[bowhntrmatt]

The IRS sent me a bill for $275 plus $135 for interest and penalties. Sent the "proper" documentation showing I didn't owe the $275, they agreed, but said I still owed the $135 in interest and penalties because the $275 was a valid tax debt owed until I filed an amended return with the "proper" documentation. I just paid it and went on about my business.

Sad part is that I guarantee it cost taxpayers way more than $135 for them to make this mistake. Doesn't sound like much but mistakes like this occurring thousands of times a year are a big excess cost for our tax system. They were just trying to make you cut their loss a little bit. Ridiculous.

[bowhntrmatt]

And to the op. Pay the taxes and move on. Next year, change your withholding so you won't owe at the end of the year.

[rtp]

I agree with just paying it and moving on but why is everyone assuming it is a withholding problem?

[Cabela]

The IRS sent me a bill for $275 plus $135 for interest and penalties. Sent the "proper" documentation showing I didn't owe the $275, they agreed, but said I still owed the $135 in interest and penalties because the $275 was a valid tax debt owed until I filed an amended return with the "proper" documentation. I just paid it and went on about my business.

Had something similar happen to me. Had proof to back it and it didn't matter. They started sending letters to seize bank accounts etc... I payed them their hundred and some odd dollars. Stupid but didn't want to push the issue for that little amount.

[N.DaWoods]

I have to agree, pay it and fix your withholding so it wont happen again.

[Playa]

I agree with just paying it and moving on but why is everyone assuming it is a withholding problem?

I'm fine with paying the amount owed, but I don't pay full price ANYWHERE unless I have too. I ask for or try to negotiate a deal almost anywhere. So if there are some tried and true tactics to negotiate a lower tax bill, then I'll give it a shot.

We thought it was a withholding issue too last year. I switched firms mid-way through 2011, and while working with our CPA, we thought it might have just been a withholding issue, that somewhere in the transition between jobs Either employer A or B did not withold enough. Fast forward to 2012, no employer change, same issue. I'm at 0 for with hold, so its at the max.

Knowing this now, I'd rather set aside $40/ per pay period for prep for next year, rather than increase holdings by that much and give the gov't an interest free loan.