If you owe the IRS, you might feel overwhelmed and you may not know where to turn. Fortunately, the IRS has a number of ways to help people and businesses resolve their tax debts and make a fresh start. Review these programs and initiatives to learn more about IRS tax resolution and deal with your tax debt once and for all.
What Is Tax Debt Relief?
Tax debt relief refers to the programs and options that the IRS has to help taxpayers who have fallen behind on their taxes to resolve the issue. This can take the form of debt settlement or a payment plan. Which outcome is right for you or your business depends on your overall financial condition and how much you owe the IRS.
Installment Agreements
If you owe the IRS $50,000 or less including interest and penalties as well as owed taxes, you can apply online for an installment agreement at IRS.gov. An installment agreement will allow you to pay a set monthly amount for a period of up to six years until the bill is paid off. An installment agreement will help you to stave off collection activities like garnishments, liens, and levies, and will end the accrual of penalties. However, an installment agreement still carries interest.
Offer in Compromise
If you do not have the resources to pay off the full amount of your debt, you may be eligible for a payment plan called an Offer in Compromise (OIC). Depending on your financial capacity, with an OIC, the IRS can significantly reduce the total amount that you owe upon acceptance of the agreement. Once your agreement is accepted, you can pay the IRS in fixed monthly payments or a lump sum.
Now, the IRS does not offer an OIC lightly. You will not be eligible for an OIC if you have not filed all your required tax returns, you are currently in an open bankruptcy proceeding, or if you are financially capable of paying the full amount.
Learn more from the IRS about how an Offer in Compromise works.
The IRS Fresh Start Initiative
The IRS Fresh Start Initiative gives taxpayers with a first-time tax debt a second chance to start fresh. With the Fresh Start Initiative, the IRS raised the dollar amount that triggers a Federal Tax Lien (FTL) and makes it easier for taxpayers to obtain an FTL release once their debt has been paid off. Additionally, the initiative eases how the IRS calculates a taxpayer’s future income and expands the types of expenses that the IRS considers relevant when determining what the taxpayer can afford to pay on a monthly basis.
Debt Settlement Companies
Debt settlement companies can negotiate with creditors to reduce the amount that creditors owe. Before you decide on a debt settlement company and start working with it, make sure to get quotes from at least three companies and get preliminary advice. Counselors can discuss your financial situation with you and help you develop a personalized plan.
If you or your business are facing IRS tax debt, you have at least a few options to consider. All you need to do is determine which of the methods for debt resolution listed here are best for you, based on your financial situation.
