10 Ways to Settle Your IRS Tax Debts For Less Than What You Owe - Defense Tax Partners (2024)

10 Ways to Settle Your IRS Tax Debt

Do you Find dealing with the IRS Time-consuming, Intimidating, and frustrating? You aren’t alone.

While taxpayers might always represent themselves in front of the IRS, the majority rely on professional tax help (specialized IRS Tax attorneys, CPAs, and Certified Tax Resolution Specialists) in order to increase their likelihood of winning a tax settlement while minimalizing their contact with IRS agents. Owing to the Internal Revenue Service (IRS) money’s scary to many people. The IRS has the power to place a lien on your property, seize your assets, and garnish your wages in order to get the money that you owe them. But these actions can be stopped by promptly communicating with the IRS regarding your situation. Usually, the IRS is willing to work with taxpayers, and there are many options available so that you could resolve your debt issues.

As a creditor, the Internal Revenue Service carries the weight of the federal government behind it. In addition to having extensive methods to collect on the outstanding tax debt, the IRS also can be extremely patient. As long as the IRS knows it is going to get paid someday, it can wait until you are in a better financial position to pay. Of course, the longer you take to pay your tax debt, the more you will owe.

1. Installment Agreement:

A monthly payment plan for paying off the IRS. If you think you are a victim of a fraudulent investment scheme (“Ponzi” Scheme), where you have lost all or most of your investment, you may be eligible to take advantage of the United States Tax Code (law) to recoup 30% to 40% of your losses. This highly technical and complex process can help you reduce taxes paid in previous years resulting in a refund with interest.

2. Partial payment installment agreement:

10 Ways to Settle Your IRS Tax Debts For Less Than What You Owe - Defense Tax Partners (1)

A new debt management program where you’ve got a long-term payment plan to pay off the IRS at a lesser dollar amount. Much like a monthly credit card payment, IRS payment plans let you pay off in installments of your unpaid back taxes rather than all at once. A Certified Tax Resolution Specialist or well-qualified tax debt attorney will conduct a negotiation for the lowest possible monthly payment for your needs.

3. Offer in Compromise:

A program where you are able to settle your tax debts for less compared to what you owe. Needs to make a short-term or lump sum payment plan in order to pay off the IRS at a lesser dollar amount. If you owe the IRS more than you can afford to pay, this could be the plan for you. Essentially, an Offer in Compromise gives you the opportunity to pay a small amount as a full and final payment. If you qualify for the Offer in Compromise program, you can save thousands of dollars in taxes, penalties, and interest.

4. Not currently collectible:

A program where the IRS agrees voluntarily not to collect on the tax debt for one year or so. Currently Not Collectible means that a taxpayer has no ability to pay his or her tax debts. The IRS could declare a taxpayer “currently not collectible,” after the IRS gets evidence that certain taxpayers has the inability to pay. This is a convenient tool since you can file for a collection appeal for the sake of stopping an IRS seizure, lien, levy or the termination or denial of an installment agreement. The collection appeal provides you with the opportunity to elaborate on how you consider the situation might be solved without the need for the IRS seizure or levy.

5. Lower Your Debt With Credit Card Debt Settlement:

10 Ways to Settle Your IRS Tax Debts For Less Than What You Owe - Defense Tax Partners (2)

There are two methods of credit card debt consolidation: through a credit card debt settlement company or on your own. Credit card debt settlement companies should be avoided. They collect your payments for months before making a settlement offer – if they make an offer at all. Meanwhile, you continue receiving collection calls and negative payment marks on your credit report. You’ll get better and faster results in settling debts on your own. Final credit card debt settlement agreements should be in writing. Either draft an agreement of your own or have your credit card company send you an agreement. Make sure you and someone from your credit card company have both signed the agreement before you send payment.

6. File bankruptcy:

Income tax debts could be eligible for discharge under Chapter 13 or Chapter 7 of the Bankruptcy Code. Filing for bankruptcy’s 1 of 5 ways to Tax Debt Relief, but you should consider bankruptcy only if you meet the requirements for discharging your taxes. Chapter 7 provides for allowable debts’ full discharge. Chapter 13 gives a payment plan to repay a few debts, with the remainder of the debts discharged

There is no “secret magic” in paying off tax debts. These are the only 5 methods of getting out from under the IRS’ debt collection tactics that are aggressive. If a tax pro promises you that you can save “pennies on the dollar” through an offer in compromise, that person is probably more interested in selling you something you don’t need instead of focusing on your unique financial situation and determining what the best course of action is for you.

7. Release Wage Garnishments.

When you owe money to Uncle Sam, the IRS could levy your federal payments, salary, or wages until the levy’s released, your tax debt’s been fully paid off, or the time expires for legally collecting the tax. There’s room here to bargain for a release or modification to the garnishment if you don’t have enough money to survive with the levy.

8. Stop the IRS from Levying Your Bank Account.

The IRS can issue a bank levy in order to take your cash in checking and savings accounts to collect back taxes. When a bank account is levied by the IRS, the bank’s required to deduct whatever available amount in your account that day (and up to the IRS levy amount) and have it sent to the IRS in 21 days unless informed otherwise by the IRS. Part of the process of resolving your IRS debt is to obtain a release of the levy from the IRS.

9. Innocent Spouse Relief.

If you happen to inherit the IRS tax problems of your spouse, you have an escape route. If you could prove that your circ*mstances fit within the guidelines of the IRS for innocent spouse tax relief, you might not be subject to the taxes caused by your spouse or ex-spouse.

10. Pay Attention to the Expiration of the Statute of Limitations.

The IRS has 10 years from the date of an assessment (usually close to the filing date) to collect every tax, interest and penalties from you. An expert tax attorney, tax resolution specialist or tax CPA can help in resolving your IRS problems and back taxes by simply strategizing and advising with you to wait out the 10-year expiration date.

This is a useful tool because you can file for a collection appeal to stop an IRS seizure, lien, levy or the termination or denial of an installment agreement. The collection appeal gives you the opportunity to explain how you think the situation could be solved without the IRS seizure or levy.

10 Ways to Settle Your IRS Tax Debts For Less Than What You Owe - Defense Tax Partners (2024)

FAQs

What is the best way to settle an IRS debt? ›

Offer in compromise

If it's determined that paying the full amount would create undue hardship, the IRS may accept a reduced sum as payment in full. This option is ideal for those facing significant financial hardship and that can prove their inability to pay the full debt.

What is the IRS one-time forgiveness? ›

One-time forgiveness, otherwise known as penalty abatement, is an IRS program that waives any penalties facing taxpayers who have made an error in filing an income tax return or paying on time. This program isn't for you if you're notoriously late on filing taxes or have multiple unresolved penalties.

How do I get my IRS debt forgiven? ›

Can I get my tax debt forgiven? 5 options to consider
  1. Use a professional tax relief service.
  2. Utilize the offer in compromise program.
  3. Request a currently not collectible (CNC) status.
  4. File for bankruptcy.
  5. Agree on a payment plan.
Mar 28, 2024

What is the IRS hardship program? ›

The IRS Hardship Program, also known as the Currently Not Collectible (CNC) status, is designed to provide temporary relief to taxpayers who are experiencing severe financial hardships and are unable to pay their tax debts.

How much will the IRS usually settle for? ›

How much will the IRS settle for? The IRS will often settle for what it deems you can feasibly pay. To determine this, the agency will take into account your assets (home, car, etc.), your income, your monthly expenses (rent, utilities, child care, etc.), your savings, and more.

Can I negotiate with the IRS myself? ›

You can submit an offer on taxes owed individually and for your business. Here are the main reasons the IRS may agree to accept less than the full amount you owe: Doubt as to Collectability: This means you don't have enough income or assets to pay your balance due in full.

What is the IRS 6 year rule? ›

6 years - If you don't report income that you should have reported, and it's more than 25% of the gross income shown on the return, or it's attributable to foreign financial assets and is more than $5,000, the time to assess tax is 6 years from the date you filed the return.

How hard is it to get an offer in compromise with the IRS? ›

First, the IRS can accept a compromise if there is doubt as to liability. A compromise meets this criterion only when there's a genuine dispute as to the existence or amount of the correct tax debt under the law. Second, the IRS can accept a compromise if there is doubt that the amount owed is fully collectible.

What if I owe the IRS and can't pay? ›

Payment options

The IRS may be able to provide some relief such as a short-term extension to pay (paid in 120 days or less), an installment agreement, an offer in compromise, or by temporarily delaying collection by reporting your account as currently not collectible until you are able to pay.

Is there really a tax forgiveness program? ›

The IRS ultimately determines whether you qualify for debt forgiveness. However, the agency generally considers taxpayers who meet these criteria: a total tax debt balance of $50,000 or less, and a total income below $100,000 for individuals (or $200,000 for married couples). Need to talk to a tax relief specialist?

Who qualifies for the IRS fresh start? ›

To be eligible for the Fresh Start Program, you must meet one of the following criteria: You're self-employed and had a drop in income of at least 25% You're single and have an income of less than $100,000. You're married and have an income of less than $200,000.

Can I get my tax debt reduced? ›

An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability or doing so creates a financial hardship.

What is the IRS amnesty program? ›

IRS amnesty programs are initiatives designed by the Internal Revenue Service (IRS) to encourage taxpayers to disclose and correct previously unreported income or tax errors voluntarily. These programs offer significant benefits, including reduced penalties and avoidance of criminal prosecution.

What is the IRS offset program? ›

The Treasury Offset Program (TOP) collects past-due (delinquent) debts (for example, child support payments) that people owe to state and federal agencies. TOP matches people and businesses who owe delinquent debts with money that federal agencies are paying (for example, a tax refund).

Who is the best tax relief company? ›

Best Tax Relief Companies for July 2024
  • Best Overall: Precision Tax Relief.
  • Best Guarantee: Anthem Tax Services.
  • Best for Large Tax Debt: Fortress Tax Relief.
  • Best for Small Tax Debt: CommunityTax.
  • Best for Businesses: Enterprise Consultants Group.
  • Best for Spanish Speakers: Tax Defense Network.

What is the downside to offer in compromise for the IRS? ›

The cons include:

Not everyone qualifies for OIC. This method is typically best for people who have very few assets and who are low income earners. With this method, you are able to reduce what you owe. However, you also surrender your right to tax credits that you may have access to each year.

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