Strategies for Dealing with IRS Debt

Step Number 1 for developing a strategy to deal with IRS debt is to do a financial analysis of the client to determine what your options are. This involves the client’s information on what they own and their future cash. The results are fed into the same formulas that the IRS uses to determine the ability to pay.

Step Number 2 is to consider which is the optimal strategy based on the ability to pay results. These strategies can be thought of as follows:

    1. Make an offer to the IRS to settle the debt for less than the total owed.
    2. Make a payment plan that the client can live with.
    3. Get the IRS to back off by showing that the client is simply not in a position to make payments.
    4. Attempt to get the original assessment modified because of errors.
    5. File an Innocent or Injured Spouse claim.
    6. If this is a problem of errors on the IRS side, file a Form 911 with the Taxpayer Advocate Service to push them to correct the records.
    7. If this is a business owner, develop a new business plan to improve profitability and cash flow to the client so that they can pay the debt.

Additionally, there is the possibility of filing bankruptcy and having some of the assessments washed out by the bankruptcy court. This requires an attorney that specializes in bankruptcy.

My next 7 posts will discuss each of these strategies in more detail.

Author: Jim Payne

Jim Payne, a Florida Certified Public Accountant (CPA) since 1976, offers candid insights on getting square with the IRS — with the least pain, and at the lowest cost — with (or without) the help of a tax representative. Mr. Payne is a former IRS agent and expert in business profitability, IRS audits, IRS payroll tax, and IRS non-filer issues. As a Tax Representative, his goal is clear: " I will speak on your behalf to all IRS agents, so you never have to, and I'll guide you in executing a strategy to resolve your IRS problem so you can get back to enjoying life."

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