Does the IRS Negotiate?

April 13, 2009 7:16 PM

Taxfilter: Is it possible to negotiate with the IRS?

While a thick envelope was a good thing to receive when applying to college, getting one from the IRS is all kinds of bad. I apparently forgot to import investment information from one of our financial institutions for 2007 which put us WAY in arrears, meaning we owe a good chunk of cash, the interest on said chunk, *and* a penalty amounting to about 4x interest.

I'm a total socialist and am fine with paying the tax $$ + interest we owe, but the penalties...not so much.

My question is this: is there any way I can get them to either take out or knock down the penalty amount? Would I get better results if I were to write a letter or call? Does our ability to pay the bill in full help or hurt our chances of getting some $$ shaved off?

I do have a wee bit of quasi-leverage: I probably rushed through the tax prep on account of having to get the paperwork filed before having MAJOR surgery to treat my colorectal cancer. I don't think I've swiped my cancer card as yet, but if I'm going to, this is the time!

Any and all strategic advice is appreciated!

posted by brigita to law & government (8 comments total)

You can settle your back taxes with the IRS with the help a tax attorney.
posted by Pants! at 7:21 PM on April 13, 2009

I'd expect that talking to a good tax lawyer will get you the farthest.
posted by winston at 7:22 PM on April 13, 2009

According to a friend who spent 5 years as an IRS auditor, IRS loves to negotiate to settle up cases.
posted by hworth at 7:32 PM on April 13, 2009

Yes. They will likely settle for exactly what you propose. If you pay it right away.
posted by JohnnyGunn at 8:05 PM on April 13, 2009

Yeah, get a lawyer. Retaining counsel may actually save you money, as they may be able to knock off more than their fee from your outstanding tax bill. They may also be able to arrange installment payments. Either way, your outcome will be a lot more favorable and easy to reach if someone who knows what they're doing is working for you.
posted by valkyryn at 4:40 AM on April 14, 2009

My roommate is a tax accountant and he does this kind of thing for 100-300 dollars. IMO you shouldn't pay more than that for help with this. If it were me I would go in alone, but then I have been hearing my roommate negotiate with the IRS on speaker phone for years and they are always helpful and willing to work things out.

Most important, go in if you can. They want to see your face. Yes, the cancer deal is going to help. Mention it without emotion. The auditor will probably respond without emotion but in her mind she will be calculating a break for you. She will be 100 per cent more likely to do this if you appear in person.
posted by cda at 7:02 AM on April 14, 2009

I did a similar thing, and when I responded with my corrected 1040 I sent a short note apologizing and asking if they would waive the fee, thinking "it never hurts to ask". They did so immediately, citing my history of filing correctly. This was despite the fact that I had made the same mistake the previous year, and had not yet settled up completely.

So, yeah, they're easy peasy.
posted by mad bomber what bombs at midnight at 10:51 AM on April 14, 2009

Reporting back, the bad news is the woman at the local IRS office said she couldn't do anything about the penalties (yeah right) but the much, much better news is that she caught an easily fixable issue with their calculations (they were missing a cost basis on some securities sales) so we should owe much less in the way of taxes (I'm still going to try to get out of the penalties, tho).

In other news, I have a bone to pick with the financial institution that failed to transfer the cost basis from the institution from which it received the securities transfer... grr...
posted by brigita at 3:28 PM on May 11, 2009