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This is a great question that we are sure many taxpayers are asking themselves. Tax Debt and COVID-19 are extremely relevant to the times we are in right now.
The short answer to your question is yes, it is possible to renegotiate a past due tax debt.
Qualifying for tax debt settlement depends on your current situation
Whether or not you qualify for any of the IRS tax relief programs is driven by your current financial situation at the time you apply for IRS tax relief.
As an example, let’s say you are enrolled in an IRS payment plan, and then lose your job. In that case, you most certainly would qualify for some tax relief. Similarly, if your wages drop dramatically you would very likely qualify for an IRS tax relief program.
In these cases, the IRS and your state tax division may both allow you to switch to a settlement plan. Due to the income loss, you can no longer reasonably be expected to repay everything you owe. You would now qualify to settle your tax debt for less, even if you didn’t qualify for settlement previously.
On the other hand, if you are on an installment plan because you did not previously qualify for a settlement option, and your income is unchanged, then you likely wouldn’t qualify for a different program. In this situation, both the IRS and state tax offices would expect that you adhere to the agreement set.
To renegotiate, you must be able to demonstrate that COVID-19 has led to a change in your financial situation such that the previous payment agreement you made is no longer workable. For at least half the workers in California, this wouldn't be much of a hurdle.
- Consult a tax professional if you are considering a renegotiation.
- If you are finding your installment agreement unaffordable, it might make sense to consult an experienced IRS problem solver.
- Any change in your financial situation means you might be in a better position now to renegotiate and settle with IRS.
It is the opinion of the IRS professionals at Flat Fee Tax Relief that the IRS will be overwhelmed with tax debt cases that need to be resolved. If our assumptions are correct, the IRS will increase its approvals of tax debt settlements.
Know this: the IRS always has 2 goals regarding tax debt. One goal is to collect money. Even a $100 tax settlement goes into the "collected case" file. The second goal is to close a file. The IRS always has "another file" to close. Approving an Offer in Compromise accomplishes both goals.
With millions of people who have been out of work, there are plenty of taxpayers in this situation. Human nature being what it is, some taxpayers may be inclined to try and stick with their payment agreements that have already been set, but that choice won't do their budget any favors. This is strictly a "business decision." Think of your personal finances as a business.
This article is written by the tax professionals at Flat Fee Tax Relief. Our teams have been providing valuable IRS tax debt help at a very affordable fee for more than a decade. Flat Fee Tax Relief tax pros are strategically located in San Diego, California, and New Port Richey, Florida. This allows our IRS problem solvers to be available to you and the IRS from 8 A.M. Eastern to 6 P.M. Pacific time. This is a tremendous advantage when stopping an IRS levy is a priority.