Is it possible to negotiate a reduction in IRS taxes owed after an installment agreement has been in effect?

Question

I am paying monthly installments on back taxes less than $25k ($38k with interest and penalty). I was turned down a few years ago on my offer of compromise and my appeal was denied, both on technicalities in my opinion. Is it possible to now negotiate a reduction like another offer in compromise?
I have been paying all other tax years on time with no problem.
Firms that offer such IRS negotiation services....are they legit or a ripoff for someone in my situation now? How much would they likely charge to do this if it is possible?

Answer 1

No, once you have reached an installment agreement with the irs they will not let you change it to an offer in compromise. You've basically said to them, "I can pay you in full", why would they then let you pay less than that?

Answer 2

Offers in Compromise are generally approved under 3 primary conditions:

1. There is simply no possible way that you could ever reasonably pay the debt. Your income must be so low relative to the debt that even by cutting to an austerity budget it would take decades to pay the IRS. You must have little or nothing in the way of assets and little prospect for future income increases. The mere fact that the IRS accepted your payment plan would indicate that this reason would not apply.

2. There is significant doubt to the actual liability for the tax debt in the first place.

3. Fairness or equity. This would come in to play if the taxpayer was legally liable for the debt (such as an "innocent" spouse or an employee responsible for preparing returns and paying taxes) but was truly powerless to avoid the circumstances that lead to the debt and where another taxpayer of better means is primarily responsible for the debt.

The firms that advertise "pennies on the dollar" settlements will take their money whether the application is successful or not. Do keep in mind that there are 100 pennies in a dollar. If they get a settlement for 99 cents on the dollar, they have delivered on their "promise" of relief.

You didn't specify the reason that the offer was denied so it's not possible to say if it was a "technicality" or was based upon the law or simply that you did not meet the criteria.