Will the IRS Negotiate on Back Taxes?

The Internal Revenue Service (IRS) building in Washington, D.C., on April 15, 2019. Zach Gibson/Getty Images

You’ve probably seen those TV ads with companies claiming they can settle your tax debt for pennies on the dollar. The ad shows happy people saying they owed thousands of dollars but only had to pay hundreds.

These companies claim to have great negotiating skills. But will the Internal Revenue Service (IRS) really come down thousands of dollars on owed taxes? Will the agency come down at all? And what about your negotiating skills? Do you even need a company to negotiate with the IRS? If you have a tax debt, knowing your options for repayment is imperative.

Delinquent Taxpayers Have Three Options

You can take one of three avenues with the IRS if you owe back taxes. They are:

• installment agreement
• temporarily delay in collection
• Offer in Compromise

The installment plan is usually the route most taxpayers take. This works for those who think they can pay their taxes in full within an extended timeframe. You set up a payment plan that lasts three to six years. Unfortunately, interest and some penalty charges will continue to be added to the amount owed until the balance is paid in full. You will also be responsible for a setup fee.