5 IRS Relief Options for Reducing IRS Debt

Every year in April, each working American is required by law to file a federal income tax return to the

The federal income tax return is a self assessment of all income a person or entity has made through the year, which is used to determine if that person has paid enough taxes on their income. It is also used to determine if a person has overpaid on taxes, and is entitled to a refund. And for the majority of Americans, filing a federal income tax return is no big deal; they'll either get a refund check, or they'll pay additional taxes to the government. 

But not all working Americans look at tax season this way. For many, this time of year is full of stress, because they know they will owe the IRS money; they also know they won't be able to pay their IRS debt. In some cases, this IRS debt is a first time occurrence; in other cases, it's a debt that has been carried over from the previous year(s), and is only getting bigger. In these situations, many people begin looking at the various IRS relief options, trying to decide which one is best for their individual situation.

The best IRS relief option depends mostly on each individual taxpayer's situation, and more specifically on each taxpayer's ability to repay the IRS debt owed. Below are 5 IRS relief options that will work to reduce or eliminate anyone's IRS debt:

Offer in Compromise

Installment Agreements

Partial Payment Installment Agreements

Currently Not Collectible

Penalty Elimination

To get a better idea of what these 5 options look like, and what situations they are best suited for, let's take a look at each one a little more closely.  

An offer in compromise allows taxpayers to settle their tax debt for less than the full amount they owe. To be eligible for this option, the taxpayer must be current in all filing and payment requirements, and must not be in an open bankruptcy proceeding. Factors the IRS considers with an offer in compromise include ability to pay, income, expenses and asset equity.

Installment Agreements

 An installment agreement or IRS payment plan allows taxpayers to make monthly payments on their tax debt. The IRS recommends that taxpayers pay their tax bill in full whenever possible, going so far as to suggest getting a loan or using a credit card. This is because installment agreements generally come with penalties, interest and fees. But by the time most people seek IRS relief, paying in full generally isn't an option anymore, but installment agreements are. 

 Partial Payment Installment Agreement

  Known as PPIAs, partial payment installment agreements are basically the same as regular installment agreements. The only difference is that with PPIAs, the taxpayer is only required to pay a portion of their outstanding tax debt. Implemented in 2005, this gives taxpayers the option to both reduce IRS debt, and pay the remaining debt with an installment agreement. 

Currently Not Collectible

Currently not collectible, or CNC, is when the IRS declares a taxpayer unable to pay his or her tax debt. Once the IRS declares a taxpayer's debt CNC, it stops all collection activities, including wage garnishments and levies.

Penalty Elimination

When tax debt isn't paid when due, penalties and interest compound. The longer the tax debt goes unpaid, the more these penalties and interests add up. Any IRS relief plan should include a penalty Relief plan, which can be negotiated by an experienced tax debt reduction professional. This can help taxpayers reduce IRS debt to only what they owed in back taxes in the first place - or less, if the taxpayer is seeking a PPIA or a CNC declaration.

For all of the above IRS relief options the IRS requires full financial disclosure of all assets, liabilities and income and expenses. This is accomplished by filling out the IRS collection Information Statements Forms 433-A and possibly Form 433-B.

CuraDebt's tax professionals have the experience to negotiate any of the above tax reduction options for you.  For a free tax relief consultation click here.