Welcome to Tip #3 in our series on Negotiating with the IRS.
In this article I will be covering the importance of aligning your goals with those of the IRS. By understanding what the primary goals of the IRS are, and how to work with them, you will have a much better chance of getting the help you need in the process.
The job of the IRS is to promote and enforce what they call compliance. A compliant taxpayer is one who files tax returns on time, pays taxes on time, reports all income, and claims only valid tax deductions. If everyone did these four things, there would be little need for the IRS.
The IRS agent you will be negotiating with wants not only to collect your tax debt, but to keep you compliant. Before negotiating any payment arrangements (other than immediate full payment), the IRS agent will check to make sure you have filed all back tax returns. If you have not filed all back tax returns, then the IRS agent is not allowed to negotiate and must continue with IRS levies, IRS seizures, and other enforced collection practices. This is because if you have not filed all back tax returns, then you are not compliant.
It is more important to the IRS that you pay this year’s taxes than your old back taxes. The IRS wants to keep you compliant from now on. The IRS does not want you paying them so much money toward your back taxes that you cannot afford to pay this year’s taxes. If they let you do this, then you will never be compliant. They would rather have you be perfectly compliant in the future even at the expense of not being able to collect the full amount on your back taxes.
Your attitude during an IRS negotiation must be that you want to become compliant and you are willing to do whatever that takes.
With that attitude, it will be as if you have joined the IRS agent on his side of the desk and are simply helping him work your case. The IRS will be more likely to trust you and not to dig as deeply as they are allowed to.
That may seem counterintuitive, but remember, the IRS has rules and guidelines they must follow, so the outcome of your case is really going to be based on how much you owe and how much you can reasonably pay. Those are two factors you really can’t do much to change, so as long as you have put together all of your facts, setting up payment arrangements will be a matter of providing the IRS with the information they need.
If you want to soften the heart of an IRS agent and have them extend you some benefit of the doubt, then you should make it clear to the IRS that your goal is to simply become compliant.
Remember, while the IRS agent can only give you certain payment terms based on your ability to pay, he may have authority to abate IRS penalty assessments if he believes you have good cause. If the IRS knows that you are compliant, they are more likely to abate penalties (though you still have to ask.)
Get on the good side of the IRS by knowing what you must do to get compliant, and you will get a better outcome from your IRS negotiations!