If you’re struggling to pay your IRS tax debt, you’re not alone. According to the IRS, more than 14 million taxpayers owed back taxes in 2020. But the good news is that the IRS offers several tax debt relief programs to help you settle your tax debt and get back on track financially. In this article, we’ll take a closer look at the IRS tax debt relief program and what you need to know to take advantage of it.
What is the IRS Tax Debt Relief Program?
The IRS tax debt relief program is a collection of programs designed to help taxpayers who cannot pay their taxes in full. The program offers several options for taxpayers to resolve their tax debt, including installment agreements, offers in compromise, and currently not collectible status.
Installment Agreements
An installment agreement is a payment plan that allows you to pay your tax debt over time. With an installment agreement, you agree to make regular monthly payments until you’ve paid off your tax debt in full. The IRS offers several different types of installment agreements, including:
- Guaranteed Installment Agreements: If you owe $10,000 or less in taxes, penalties, and interest, you may be eligible for a guaranteed installment agreement. With a guaranteed installment agreement, the IRS must agree to your payment plan if you meet certain criteria, such as having filed all your tax returns on time.
- Streamlined Installment Agreements: If you owe $50,000 or less in taxes, penalties, and interest, you may be eligible for a streamlined installment agreement. With a streamlined installment agreement, you don’t need to provide the IRS with a financial statement or other documentation to qualify.
- Partial Payment Installment Agreements: If you can’t afford to pay your tax debt in full, you may be eligible for a partial payment installment agreement. With a partial payment installment agreement, you make smaller monthly payments but won’t pay off your tax debt in full.
Offers in Compromise
An offer in compromise is an agreement between you and the IRS to settle your tax debt for less than you owe. To qualify for an offer in compromise, you must meet certain criteria, such as demonstrating that you can’t pay your tax debt in full or that paying your tax debt would cause undue hardship.
Currently Not Collectible Status
If you can’t pay your tax debt and your financial situation is unlikely to improve soon, you may be eligible for currently not collectible (CNC) status. With CNC status, the IRS agrees to suspend collection activity on your tax debt temporarily. While you’re in CNC status, penalties and interest continue to accrue on your tax debt, but the IRS won’t take any collection action against you.
How to Apply for the IRS Tax Debt Relief Program
To apply for the IRS tax debt relief program, you must complete and submit several forms and documents to the IRS. The specific forms you must submit depend on the program you’re applying for. For example, if you’re applying for an installment agreement, you must complete Form 9465, Installment Agreement Request, and provide the IRS with detailed financial information. If you’re applying for an offer in compromise, you must complete Form 656, Offer in Compromise, and provide the IRS with detailed financial information and documentation.
It’s important to note that applying for the IRS tax debt relief program can be a complex and time-consuming process. You may want to consider working with a tax professional, such as a tax attorney or enrolled agent, who can help you navigate the application process and ensure you’re taking advantage of all the tax debt relief programs you’re eligible for.
Final Thoughts
If you’re struggling to pay your IRS tax debt, the IRS tax debt relief program can provide you with much-needed relief. By taking advantage of the installment agreement, offer in compromise, or currently not collectible status, you can work with the IRS to find a solution that fits your unique financial situation. It’s important to note that these programs are not a “get out of jail free” card, and you will still need to pay your tax debt in some form. However, by working with the IRS, you can avoid penalties and interest and find a way to pay off your tax debt without financial hardship.
Remember, the IRS tax debt relief program is designed to help taxpayers who are struggling to pay their taxes. If you’re facing tax debt, don’t ignore it. Instead, take action and explore your options for tax debt relief. The sooner you take action, the sooner you can start working towards a debt-free future.
