The IRS handled a large volume of collection activity in fiscal year 2025. The agency collected $117.5 billion in unpaid assessments on returns filed with additional tax due. During the same year, taxpayers submitted 38,797 offers in compromise. The IRS accepted 5,464 of them, reaching a total of about $98.1 million in accepted offers.
So, can you negotiate with the IRS? Under certain circumstances, businesses can pay their federal tax liability over time. If they need to, they can set up an installment plan for their tax liability. When it comes to addressing tax issues, businesses can choose from a range of methods, including penalty relief. One of the more radical ways to resolve tax debt is to offer an amount to the IRS that is less than what is owed, a process known as an offer in compromise. A business that disagrees with the IRS’s findings can also challenge them through the appeals process.
The IRS may allow negotiations, but that doesn’t mean a business can simply reduce what it owes.
Business owners should know their options when deciding how to handle IRS tax debt. Let’s go through what each of the IRS debt options entails.
The IRS Does Negotiate, Within Real Limits
The IRS assumes that a taxpayer who can pay in full will do so. How much a business has to prove depends on the option. Less documentation may be needed for a simple payment plan. With an offer in compromise, the IRS must see proof that the proposed smaller payment amount is the highest sum the agency can hope to recover.
The scale of what’s negotiated each year is substantial. During the 2025 fiscal year, the IRS brought in more than $5.3 trillion from taxes. This included cases where negotiated agreements, including payment plans and offers, were put in place.
Negotiating isn’t just for dire situations. It’s a routine part of how the IRS resolves debt it can’t otherwise collect efficiently.
The Main Paths Available to a Business
There are a few main directions a company can choose. Which path to follow depends on whether the company’s issue will resolve on its own in the short term or is more deeply entrenched in the company’s structure.
Installment agreements do not reduce the debt, but they provide an alternative to the large sum of money a company cannot afford at once by creating a schedule for monthly payments. As long as payments are made on time, this option also stops most collection action.
If a company has no ability to pay, it can ask the IRS to classify its account as “currently not collectible.” This will stop the IRS from pursuing the money, but it is not a permanent status. Penalties and interest will continue to grow while the company remains in this status. If the company’s financial status improves, the IRS can resume collection.
Penalty abatement can be used in limited situations, like a company having an excellent prior compliance history or a specific, uncontrollable event occurring that led to a missed payment or tax return filing. What penalty abatement cannot do is to eliminate a company’s tax debt.
Of all the methods for resolving unpaid tax debt, an offer in compromise is the most intensive and challenging. The 2025 fiscal year shows how difficult it is to obtain an offer in compromise, as the IRS received 38,797 offers but only accepted 5,464. This figure is around one in seven. Even more telling, in the previous two years, they accepted more offers than that.
None of these programs work on a compelling story alone. They all need documents like financial records, income and expenditure accounts, and evidence for any claims made by the business.
A California business litigation lawyer who handles disputes involving regulatory agencies and government enforcement sees a version of this same dynamic. Agencies tend to respond to well-documented, clearly presented positions rather than general appeals for leniency. Businesses that are consistent with their preparedness tend to be more successful.
Having the right documents matters, but so does honest, open communication. Firms can spoil their prospects in negotiations when they either exaggerate the difficulty of the situation or offer terms that are not possible to implement. Being inconsistent in tax filings is also damaging and can quickly erode the reviewer’s trust in the entirety of their application.
Why Professional Representation Changes the Math
While businesses can choose to tackle any of the options outlined above, they are not without difficulty. Managing financial documentation, selecting the best-fit programs, and working directly with the IRS can be complex and challenging. If a tax attorney assists with a request, many costly errors can be avoided.
Why Waiting Rarely Helps
None of these factors means every business qualifies for every program, and eligibility depends on the specific financial facts involved. Businesses that engage with the IRS early, before liens, levies, or more aggressive collection actions begin, may have more options available than those who wait until the situation has already escalated.
A business’s options tend to narrow the longer unpaid tax debt sits unaddressed.
The IRS handled a large volume of collection activity in fiscal year 2025. The agency collected $117.5 billion in unpaid assessments on returns filed with additional tax due. During the same year, taxpayers submitted 38,797 offers in compromise. The IRS accepted 5,464 of them, reaching a total of about $98.1 million in accepted offers.
So, can you negotiate with the IRS? Under certain circumstances, businesses can pay their federal tax liability over time. If they need to, they can set up an installment plan for their tax liability. When it comes to addressing tax issues, businesses can choose from a range of methods, including penalty relief. One of the more radical ways to resolve tax debt is to offer an amount to the IRS that is less than what is owed, a process known as an offer in compromise. A business that disagrees with the IRS’s findings can also challenge them through the appeals process.
The IRS may allow negotiations, but that doesn’t mean a business can simply reduce what it owes.
Business owners should know their options when deciding how to handle IRS tax debt. Let’s go through what each of the IRS debt options entails.
The IRS Does Negotiate, Within Real Limits
The IRS assumes that a taxpayer who can pay in full will do so. How much a business has to prove depends on the option. Less documentation may be needed for a simple payment plan. With an offer in compromise, the IRS must see proof that the proposed smaller payment amount is the highest sum the agency can hope to recover.
The scale of what’s negotiated each year is substantial. During the 2025 fiscal year, the IRS brought in more than $5.3 trillion from taxes. This included cases where negotiated agreements, including payment plans and offers, were put in place.
Negotiating isn’t just for dire situations. It’s a routine part of how the IRS resolves debt it can’t otherwise collect efficiently.
The Main Paths Available to a Business
There are a few main directions a company can choose. Which path to follow depends on whether the company’s issue will resolve on its own in the short term or is more deeply entrenched in the company’s structure.
Installment agreements do not reduce the debt, but they provide an alternative to the large sum of money a company cannot afford at once by creating a schedule for monthly payments. As long as payments are made on time, this option also stops most collection action.
If a company has no ability to pay, it can ask the IRS to classify its account as “currently not collectible.” This will stop the IRS from pursuing the money, but it is not a permanent status. Penalties and interest will continue to grow while the company remains in this status. If the company’s financial status improves, the IRS can resume collection.
Penalty abatement can be used in limited situations, like a company having an excellent prior compliance history or a specific, uncontrollable event occurring that led to a missed payment or tax return filing. What penalty abatement cannot do is to eliminate a company’s tax debt.
Of all the methods for resolving unpaid tax debt, an offer in compromise is the most intensive and challenging. The 2025 fiscal year shows how difficult it is to obtain an offer in compromise, as the IRS received 38,797 offers but only accepted 5,464. This figure is around one in seven. Even more telling, in the previous two years, they accepted more offers than that.
What Effective Negotiation Actually Requires
None of these programs work on a compelling story alone. They all need documents like financial records, income and expenditure accounts, and evidence for any claims made by the business.
A California business litigation lawyer who handles disputes involving regulatory agencies and government enforcement sees a version of this same dynamic. Agencies tend to respond to well-documented, clearly presented positions rather than general appeals for leniency. Businesses that are consistent with their preparedness tend to be more successful.
Having the right documents matters, but so does honest, open communication. Firms can spoil their prospects in negotiations when they either exaggerate the difficulty of the situation or offer terms that are not possible to implement. Being inconsistent in tax filings is also damaging and can quickly erode the reviewer’s trust in the entirety of their application.
Why Professional Representation Changes the Math
While businesses can choose to tackle any of the options outlined above, they are not without difficulty. Managing financial documentation, selecting the best-fit programs, and working directly with the IRS can be complex and challenging. If a tax attorney assists with a request, many costly errors can be avoided.
Why Waiting Rarely Helps
None of these factors means every business qualifies for every program, and eligibility depends on the specific financial facts involved. Businesses that engage with the IRS early, before liens, levies, or more aggressive collection actions begin, may have more options available than those who wait until the situation has already escalated.
A business’s options tend to narrow the longer unpaid tax debt sits unaddressed.
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