Whittling Down the Tax Man.

• Author: Berger, James T.
• Position: Brief Article

Negotiate a lower tax bill

Individuals and small businesses that owe a big debt to the Internal Revenue Service might try playing "Let's Make a Deal." They may discover the big tax agency has indeed become kinder and gentler.

Negotiated tax settlements have been around for years, but the IRS Restructuring and Reform Act of 1998 continues to make them easier for taxpayers. In fact, last year for the first time, the IRS was allowed to consider "economic hardship factors" in considering applications for compromise. The IRS has had a program, Offers in Compromise, in place for some time. Its purpose is to let financially strapped taxpayers negotiate for a lower tax bill. But many taxpayers couldn't even get to first base because agents were rejecting offers even before they reached the stage of negotiation.

The 1998 tax law overcame this barrier and gave the IRS only two causes to reject an offer as "not processable": first, if one is bankrupt and therefore has no way to pay anything; or, second, if one hasn't filed returns, which means there is no basis for negotiation.

"The average taxpayer has no idea that the IRS will compromise debts that are owed to them by way of offer and compromise," says Salt Lake City CPA Ken Bement, president of Bement & Company. "People and businesses are not fully informed about their options with the IRS and tend to hide their heads in the sand."

The extent to which the IRS will go to...