Learning About Tax Negotiation
By: Max Plata
If you are considering implementing tax negotiations, the first thing you must do is find a
qualified tax specialist. You will not be able to effectively handle a tax negotiation on your own,
and the help of a trained professional is imperative. A competent tax professional will be able to
collect all of the pertinent information, complete all of the necessary paperwork, and handle all
of the correspondence with the Internal Revenue Service representatives. There are numerous ways
that a tax negotiation can work in your best interest.
There is a program entitled “Offers in Compromise”. This program allows you, through your
hired tax professional, to make an offer to the Internal Revenue Service for an amount that is
actually less than the amount of taxes that you owe. Sometimes, the Internal Revenue Service will
accept this offer, and you will be able to become debt free from the Internal Revenue Service for
much less than what you had originally owed.
If you do choose to enter into tax negotiations with the Internal Revenue Service, and you
have decided to make an Offer in Compromise, you need to understand that the Internal Revenue
Service has three factors that they examine when deciding whether or not to accept such an offer.
The Internal Revenue Service will look at many factors and determine if any of the following apply
in your particular case; whether there is any doubt that you even actually owe the liability,
whether you can afford to pay the liability if you truly owe it, and whether or not the settlement
would promote effective tax administration.
Prior to 1992, the Internal Revenue Service was less likely than they are today to settle a
tax liability for less than the actual owed amount. However, due to new procedures and regulations
that have been put into place concerning the settlement of back taxes, the Internal Revenue Service
is accepting more and more Offers in Compromise.
While tax negotiations are used to settle back tax situations, there are also other instances
where tax negotiations are also used. Taxpayers sometimes use tax negotiations when the Internal
Revenue Service says they owe a certain amount of tax and the taxpayer does not agree. Tax
negotiations are also used to extend the amount of time, as well as lower the amount of interest
that is to be paid for any back taxes that may be owed.
Tax negotiations should only be used in the most extreme situations. A tax negotiation is a
tool, and should be used as such. Do not think that you can hire a tax professional every April and
get out of any taxes that you may owe; the Internal Revenue Service will not take kindly to such an
abuse of the system.
If tax negotiations may be the only hope for you, make sure that the tax professional you
hire is licensed and has relevant experience handling your type of situation. They may just end up
saving you a ton of money, as well as saving you from a lot of financial aggravation.
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