Hundreds of thousands of people end up with a tax bill they can't afford to pay because debt can snowball so quickly, and current income can drop dramatically. Thanks to the internet and late-night TV there is a lot of confusion about what IRS debt settlement negotiations actually are. In this article we won't give you false promises, but rather, tell you about a little-known secret called "RCP" that determines the deal you can negotiate with the IRS. But first, I want to tell you what IRS debt settlement negotiation isn't.
What IRS debt settlement negotiation isn't
IRS debt settlement negotiations are not like negotiating over a business debt. Let's suppose Peter owes Paul $10,000 for a stained glass window. Peter has the money available to pay Paul in full, but he's a sneaky guy and tells Paul he can only afford to pay him $7,000. So what can Peter do? Well, Peter knows he will have to sue Paul. He knows an attorney will cost him $3000. He could try suing Peter himself but he simple doesn't have the time or skills. So what to do? Peter grudgingly accepts $7,000 as full payment, simply because Paul is making collecting on what is rightfully owed difficult.
This sort of "payment leverage" is not available with the IRS. IRS debt settlement negotiations will always center around how much of your tax debt you can afford to repay; the IRS calls this your "Realistic Collection Potential" or RCP. You need to prove to the IRS, without a shadow of a doubt, that you truly can't afford to pay your tax debt in full. There is no Offer in Compromise or Penalty Abatement magic wand to automatically get your IRS tax debt lowered. It doesn't work that way. This is why we can't stand the Tax Resolution companies that promise you will only pay "pennies on the dollar!"
What IRS debt settlement negotiations is
If the IRS levies your wages and leaves you with $200 a week to live on, how are you going to pay for gas to drive to your job to make your wages? How can you work is you can't get rest or have cleans clothes? Or if you can't get something to eat? The IRS does not want you living on the street. Its policy has been to allow for people to pay for necessary living expenses first. Then, whatever is leftover goes to pay the IRS.
So it is in the IRS' best interest to negotiate with you. The IRS knows that you can't get blood from a stone, and the surest way to turn someone into a stone is by taking away all the fruits of their labor. So giving you "a break" benefits the IRS as they will be able to collect at least something from you.
When telling the IRS your financial story, you need to ensure you include every single expense available to you so you end up with the best deal. And while hiding or moving money around (say, by gifting $10,000 to your cat, George) may seem like a good idea, it is not. The IRS does a thorough investigation on your assets, and if they see you trying to hide any it will shine a very negative light on you.
What are negotiation options?
There are various settlement options that will be best suited for your situation. Things like a payment plan, an Offer in Compromise, penalty abatement, and others. It really depends on your unique situation. Click here to learn more about these options:
Feel free to contact us for a free consultation if you need assistance understanding which option is best for you.
It gives us great pleasure to have helped thousands of taxpayers who tried to negotiate their tax debt on their own and failed. Convincing the IRS to accept the lowest "RCP" give us a sense of satisfaction, and our clients a wonderful feeling that they are even closer to the light at the end of the tunnel.
