IRS Tax Debt Settlement Advice: How To Deal With Unpaid Taxes

People owe money to the government for taxes several reasons. Your need for tax debt settlement may be due to failing to pay taxes and penalties, or due to improper filing of taxes. Regardless of the reason for your unpaid taxes, a tax debt settlement can save you money and stress if done right.

How to Settle Your Debt

If you want to settle your tax debt with the IRS, you will need to make sure that you have complied with the rules regarding tax filings and that you have filed any unfiled tax returns.

The process of debt settlement with the IRS is then similar to the traditional one –you negotiate to lower the amount of money you have to pay. This can be done by either hiring a debt settlement company or doing it yourself.

The Process

  • Once you receive the notice for your tax debt, start strategizing about how to settle it with the IRS.
  • Keep in mind that if you do nothing immediately, your tax debt can increase exponentially because of the penalties, interest and other late fees. The sooner you face it, the more options you can explore and the better chances of lowering your debt to a more reasonable level.
  • First of all, go through your taxes and determine if the IRS made a mistake when calculating your taxes. If this is the case, let them know so the appropriate deductions can be made. You can also seek assistance from a lawyer to help you.
  • Next, speak with you auditor and start negotiating. Never specify the amount to be deducted but instead, use appropriate terms such as "disallowances" and "adjustments."
  • It is best if you can present records that will correspond to any deductions on your return. Instead of requesting for a full deduction on the amount, a partial deduction will be more feasible.

Every time you consult with your auditor, be sure to keep records of your negotiations with IRS through notes. Typically it will take several months before any settlement is approved and finalized since the process involves many levels or departments of the IRS. Taking notes is helpful, especially when you receive documents in the mail that do not correspond to what you initially agreed upon.


Most of the time, when people owe a certain debt, penalties can be charged. This will cause the debt to become much larger. However, if you have undergone certain justifiable circumstances such as natural disasters, stolen files, or bad accounting, the IRS can forgive those penalties. The IRS may also be willing to reduce or forgive penalties if you have shown efforts to settle your debt. This modification of penalties is referred to as Penalty Abatement.

Getting Help

The most common advice given for those negotiating a debt settlement with the IRS is to first consult with tax experts and professionals who can help you reduce your tax debt. Specifically, tax lawyers know the tricks of trade when it comes to handling the IRS and providing you with the best deal possible.

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