Why Now Is the Perfect Time to Negotiate Tax Debt with the IRS

By Chris Huntley

Certified Credit Consultant, licensed insurance agent, and former Series 65 Registered Investment Advisor

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Summary: If you're struggling financially because of the coronavirus pandemic, you may have a unique opportunity to negotiate your tax debt with the IRS. 

If you're one of the 8% of Americans who owes back taxes to the IRS, there may be one silver lining to the financial stress caused by COVID-19.

Especially if you've lost your job.

If your income isn't what it used to be, your financial hardship could open up a fresh opportunity to deal with your tax debt.

Have you heard of an Offer in Compromise (OIC)?

It's where you settle your tax debt for less than you owe.

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No Money to Pay the IRS?

Get a free consultation with a tax relief expert to see if you qualify for the Fresh Start.

It's quick, easy, and free.

Yes, it's really possible.

If you owe the IRS outstanding tax debt, there may actually be a benefit to getting fired... it puts you in a better position to negotiate with the IRS. 

"Job losses can potentially improve your chances of a successful OIC if it creates a legitimate hardship in repaying your tax debt," said Brandon Pfaff, CPA and tax expert, who serves on the advisory board for Wealthy Living Today.

Why Now Is the Best Time to Negotiate with the IRS

How the IRS is Helping Taxpayers During the Coronavirus Outbreak

COVID-19 has crippled much of the economy, and there have been roughly 16 million job loss claims as a result. 

The number of people without jobs is expected to climb.

If you've been affected, you've got better things to worry about than paying your outstanding tax liability.

I mean, you've got to eat, right?  And keep the lights on.

Here are two ways the IRS is trying to help:

1.) Extension of Tax Due Date

"The US government is well aware that taxes will go unpaid and have extended the traditional April 15 tax day to July 15, said Pfaff. 

"This keeps taxpayers from accruing penalties and interest on outstanding taxes."

The extension is part of the People First Initiative.

It's an aid program designed explicitly for taxpayers affected by the coronavirus.

2) Temporary Suspension of Liens and Levies

When you owe money to the IRS, two of the strategies they employee to get you to pay are tax liens (the IRS stakes legal claim to your assets) and tax levies (where they can freeze your bank account or even go in and remove money!)

Fortunately, all IRS lien and levy actions are suspended until July 15, 2020.

Quick Tip:

Have a tax lien on your house? The IRS can grant a tax lien release so you can sell your home or apply for a home equity loan to help you pay your tax debt. But first, talk to a tax debt professional about ways to reduce the amount you owe.

"By suspending the lien and levy, there is now an opportunity for taxpayers who are late or have not filed for a while to get into compliance and put forward offers," said Alistair Bambridge, an award-winning author, accountant, and tax relief expert at Bambridge Accountants.

This could be an excellent opportunity to submit an offer in compromise and settle your tax debt once and for all.

Get a free tax debt consultation!

Could an Offer in Compromise Work for You?

A few situations exist where the IRS will consider an OIC.

One of them is Doubt as to Collectibility.

What does that mean?

Basically, it means your tax debt is more than your assets and income.

"This OIC is for people who can't pay their taxes and want to settle for an amount less than the total payment owed," said David McKeegan, MBA, EA, and Co-Founder of Greenback Tax Services.

Have you lost your job or had your hours cut from COVID-19?

There might be a silver lining.

"Job loss may be a factor in applications for a Doubt as to Collectibility Offer in Compromise," said McKeegan.

If your income suffered and you're relying on your savings to survive, it's unlikely the IRS will be able to collect your tax debt.

And this can put you in the perfect position to negotiate an OIC with the IRS.

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Negotiating an Offer in Compromise

Now, there's something you must do before the IRS even considers your OIC.

You must file all required tax returns.

If you're not up to date, the IRS won't work with you!

You also need the OIC booklet and IRS Form 656.

At this point, you have two options. You can:

  • Take the DIY route

  • Contact a tax pro

Doing it yourself is tempting, but it isn't always the best approach.


The IRS rejects more offers that it approves.

The biggest problems?

Errors on the forms. Or the wrong forms. Or not enough information.

Offer in Compromise Mistakes:

Tax relief expert (and former IRS revenue officer) Jeffrey McNeal says when he processed offers, he saw tons of mistakes made on the forms, even when prepared by CPAs and enrolled agents! So be sure to ask an expert for help.

Keep in mind that there's no guarantee your job loss will result in a successful tax settlement.

"If you are likely to return to a well-paying career or have significant assets to cover expenses during unemployment, the IRS may decide that you should be able to pay the taxes due," said McKeegan.

Still, the pandemic presents a unique situation for Americans. 

"Given the widespread and sometimes devastating effects of the pandemic, the IRS is likely to consider these unprecedented circumstances when evaluating OIC cases," said McKeegan.

IRS Closed... Get Your Application Ready

The IRS has temporarily suspended OIC applications due to office closures.  However, this is a great time to start the process.  It will take you time to complete the necessary forms and you may need to get caught up with tax filings.  Start today!

Get a free tax debt consultation!

Don't Let COVID-19 Stop You from Getting Tax Relief Help

There's no denying that coronavirus is having an enormous impact on your life.

And it's bound to affect your finances.

But perhaps you can take advantage of this one silver lining of financial difficulty and finally address your IRS tax debt while you are in the strongest position to negotiate.

If you have tax debt and lost your income, reach out to our #1 tax debt relief company, Optima Tax Relief.

They offer a free consultation and can help you decide if an offer in compromise is right for you.

Get a free tax debt consultation!

amy beardsley

By Amy Beardsley

Amy is a personal finance expert and freelance writer and owner of Early Morning Money, She has bachelor degrees in business administration and legal studies, and her work has been featured on The Huffington Post, Money Tips, and many other personal finance publications. 

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