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Terms of Service How To Settle With The IRS
Home Finance Tax
By: Willaim D. Truax Email Article
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Owe money to the IRS? Owe a lot? Too much? Well, donít assume that the best thing to do is hope it will somehow go away, or just hunker down and wait for them to come after you. Actually, in many ways, thatís the worst thing you can do.

The big news is that, in many cases, you can actually work out a deal with IRS that you can live with without having to go live in a cardboard box. Not only that, but the way the system works, usually the best thing you can do is to approach them, as opposed to waiting for them to find you.

Do you recall the "horrible IRS" hearings in the Senate Finance committee from the late 90's? The hearings which led to a slew of restrictions on the powers of the taxman and promises for a "kinder, gentler IRS"? Even if you donít, many laws and regulations were enacted as a result of those hearings which still, to this day, form the backbone of important protections for taxpayers. The only requirement to make use of these protections in many cases is that you must be working in good faith with the IRS to sort out your situation.

For example, even if you owe back taxes, youíre allowed to live, and pay your mortgage or rent, and eat food, and own a car, and make car payments, and pay medical bills, and buy clothes, and pay current taxes and have insurance and everything. The IRS simply canít take or demand that you pay over money which you need to have a reasonable lifestyle. They publish whatís called "National Standards" for collection purposes which give taxpayers an idea of what IRS will allow for expenses like housing, utilities, medical expenses, food and clothing, and transportation (usually car) expenses. For those sorts of expenses for which standards are not published, all you have to do is show that youíre spending the money and that you need to spend it (the important word being "need").

It doesnít take a genius to figure out that, given the rough economic environment, many people really donít have any money which isnít being spent on necessities. What happens if every dime you make goes to cover necessary living expenses or the taxes on the income youíre making? Simply put, if thereís nothing left, thereís nothing left, even for the great and powerful IRS.

The trick, if you could call it that, is that these sorts of allowances are only available to taxpayers who are "cooperating" with IRS. Now, I know that little word "cooperating" has been used many times in the past to mean "going along with the coercion", but in this case, it just means making a good faith effort to sort out the mess. If you are in communication with them, if youíre honest about what youíre making and spending, and if it works out that you canít really afford to pay much or anything, thatís all there is to it. No levies, no garnishments, no seizures, no threats. You just pay them what you can afford, and if you stick to the agreement, you are protected.

Believe it of or not, the single thing the IRS is most interested in is seeing that you file and pay your taxes on time from here on out. Even more than collecting on an old bill. They would much rather you file and pay on time from now on, even if it means giving up on that huge old tax bill.

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William Truax, a tax practitioner & financial consultant in private practice over thirty years, is founder of William D. Truax, E.A. Tax Advisors (, in Glendale, CA--experts at tax prep, planning & representation. His full bio & services offered is at

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