Irs debt settlement: Can it be done?

Until you make concrete arrangements with the IRS to settle IRS debt, they will continue to add daily interest. Call them and make arrangements right away!

I have heard that IRS debt settlement can be done if only you owe them less than $10,000. Is this true? Also, do all debt settlement firms settle IRS debts?

Interest is NOT 8% daily....it is yearly compounded.

Debt settlement firms do not handle federal debts like student loans and the IRS.

And yes, they will settle on smaller amounts.

just make sure to always file the return on time, even if you don't have the money. The failure to file penalty is a big one and can be much more significant than the interest on the unpaid tax.

Hi All: I owe a little over $7,000.00 (Yikes..I know). I have set up an arrangement and am paying on time at $110.00 per month. Do you think they would settle with me for less than the $7,000.00? I will be 100 by the time this is paid off. Any advice please:)

You can go to their website and get an installment agreement where you pay them a monthly amount. I am currently enrolled in one. They are paid $103 every month for $7,200 in taxes. My withholding got messed up when I got my second job. I am having more taken out now so the same thing doesn't happen, but this is a good way to pay and not have your check garnished or a lien put against your home.

They won't settle for that amount, but you CAN send them more and they will take any future tax refunds, stimulus checks, etc. They took my $600 stimulus that Bush sent out. It was applied.

Thank you. The same thing happened to me with my withholding.

I was just going to reply back too:). Yes..I think I will get a refund this year and will take that and apply it towards the balance. Thanks again:)

Missy,

It is all dependent on your situation. If you are in a severe financial hardship you may qualify for an OIC or have some interest waived. The difficult part for you would be that you do not owe enough to justify the fee it would cost to have someone review your situation and submit an OIC for you. Dealing with the IRS on your own is a rarely recommended option. So if you can, the best bet is just to increase the amount of your payment as much as you can and pay it off as quickly as you can.

Thanks Damon: I am working full-time, but my husband is out of work still. Do you think I can write them a letter and explain the situation or is it a waste of time. I can give you what I pay out in expenses offline if that helps. Thanks so much for your help:)

What is being discussed here is called an offer in compromise! You can file it at the local IRS office or hire a tax lawyer or settlement group to do it for you! The IRS will often settle for lots less if you can pay it right away! They will not if you need installments as a rule!

Not a problem Missy,

First let me clarify that I am not a tax attorney, and I do not specialize in IRS debt. It may make sense for you to contact a few tax attorneys that offer free consultations and pick their brains for 20 minutes or so with your specific situation. They should be able to tell you whether or not you have a chance at a reduction.

As far as writing a letter, that can be a double edged sword. I know many people that have taken the simple direct approach and unfortunately the IRS is not your friend. It is very sad that they treat people the way they do, but they can and very often do use anything you tell them against you. Many times people will contact them asking if they can have a reduction, the IRS will ask for all of their financial records among other things, and then might determine that they actually owe more.

What is the 7200 dollars owed for? What tax year was it for? How much of that is what they claim you owed in principle vs interest and potential penalties?

Hi Damon: Thanks again!. I owe for tax years' 2005,2006 and 2007. I wish I had my paperwork here, but I don't. I know I owed the most in 2005 with the most interest I believe was $300 and some change and a bit less on 2006 and 2007. I will see what a tax attorney says, but I am guessing I am stuck with the payment for now. It is my own fault anyway, I did not adjust my withholdings. Do you also do financial advice?

The IRS basically ignores letters and sends you computer-generated responses that don't address what's in your letter. Been there - done that!

I would stick with the monthly payment and add on more when you can. Or if you have a pension/401k you may consider "borrowing" from it.

My payment is $103 a month and I send them extra. October has 3 pays for me so I will send them double. and of course they will take any refund I get. The trick to the installment plan is that you cannot owe taxes in the future, it will invalidate the agreement (this is on IRS website). So make sure your withholding covers your taxes for 2009.

Thanks Aubrey: I learned my lesson. My 2009 should be fine and I am sending more on my agreement than $107. We will celebrate when we pay them off:))

You're right there.... I was wondering how all those politicians/people who were to be appointed in Obama's White House got away so long without paying their taxes, and the amounts owed were way over what we owe. They're ready to attach our wages/ put liens, and these people seem to get away with it until they are "vetted" and then the stuff hits the fan......