Can I Change My Settlement with the IRS?
By Dean Alexander
It depends. If you have an offer in compromise, you may not change the settlement unless you submit another offer. If you have an installment agreement you may be able to change the settlement. But why would one change a settlement with the IRS after presumably one would struggle to get a tax resolution with Uncle Sam?
Why Should You Renegotiate Your Settlement?
There are basically three reasons as to why you should consider changing the agreement with the IRS. The first is just that you can no longer afford the agreement. The second is that the agreement amount is too high because it was based on the IRS estimate of the liability. The third is that new facts showing that you don’t owe this liability have surfaced.
How to Renegotiate an IRS Agreement
If you want to renegotiate your agreement because you cannot afford it, you must submit all your financials again on form 433 with all the supporting documents. You must prove to the IRS that your circumstances have changed and you no longer can afford the old agreement. It happens all the time. You can even be declared uncollectible instead of paying a previous large monthly installment agreement.
The Problem of Substitute for Returns
If you have to negotiate an installment agreement with the IRS and the agreement is based on the substitute for returns, the amount that the IRS determines that you should pay is probably inflated. As soon as you file the actual returns and the assessment is made by the IRS, you can reopen the case and possibly renegotiate the agreement based on the actual amount which is presumably a lower debt and therefore a lower installment.
Can I Renegotiate an Agreement Based on New Facts?
The answer is yes. In this case it may be a long route to a final settlement. For example, if you discovered an error that inflated your income, you may have to file an amended return first, and after the assessment, which will take several months, you may be able to renegotiate your back taxes.
Can I renegotiate an Offer in Compromise?
An offer in compromise is an agreement to reduce the tax debt once and for all based on certain financial analyses and assuming certain compliance. So the audit has the air of finality. Accordingly the offer is not renegotiable. Any renegotiation has to imply a new offer or an amended offer. In the first case the process may have to start all over again. In the latter one you must submit the amended offer before it is closed.
Again the underlining reason for renegotiating the offer or any other IRS settlement is the discovery of new circumstances that shed light on a favorable situation for the taxpayer. Excluded from this possibility when you submit the offer is the benefit of reconsideration of substitute for returns. Substitute for return reconsideration has to be submitted before applying for the first offer. Therefore that would not be a reason for attempting to negotiate amending the offer.
Dean Alexander has been helping clients across the country with tax issues for over 30 years. He currently is the president of NFA Tax Help located in Houston, TX. Their website is www.resolvemytaxes.com.