How to Settle Taxes for Less With the IRS


Just when you think you are clear of the IRS by filing your taxes, you receive a letter in the mail that you are being audited. An audit is when the IRS, or Internal Revenue Service, reviews your taxes for accuracy. Less than 25% of taxpayers that are audited get by without having to pay additional taxes. If you are not lucky enough to be one of those people, there is a way you can settle with the IRS for less than the amount the IRS says you owe. While tax professionals will help you for a fee, there are simple ways to settle with the IRS on your own.

Things You'll Need

  • Computer
  • Internet access
  • Stamps
  • Envelopes
  • Telephone
  • Fax capability

How to Settle Taxes for Less with the IRS

Contact your auditor. You may receive mail periodically from your auditor about your case. Respond quickly to any correspondence your auditor sends. If you owe taxes, your auditor may offer you a payment plan or a settlement. If not, contact your auditor and ask if such plans are available. To ensure they receive their money, IRS officials may agree to offer you a greater discount if you pay a lump-sum settlement.

Complete an Offer in Compromise. If your auditor does not provide you with the necessary forms, you can download them on the Internal Revenue Service website at You will need Form 656 or Form 656-L, depending on why you are filing an Offer in Compromise. To determine which form to complete, you may need to download Form 656-B, which is a booklet of information regarding an Offer in Compromise.

Submit the Offer in Compromise. You will need to include the payment for the settlement of your taxes owed. You can mail or fax the Offer in Compromise; however, the payment must be submitted before the taxes will be settled.

Check with your auditor on the status of your Offer in Compromise. If you complete the offer yourself, the forms may not be filled out correctly and the IRS may reject your offer. You may opt to have a tax professional review your Offer in Compromise before you submit it. If the IRS finds errors, it may be returned to you for correction. To avoid additional tax penalties you should submit it again promptly.

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