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Tax Debt Relief - Can't Pay IRS Debt?

Updated: Sep 21


Coast to Coast - IRS Help

Tax Debt Help - IRS Tax Relief

According to recent surveys, of those who failed to file by last year’s extended July 15, 2020, deadline, 24% knew they owed money but were unable to pay, and 18% didn’t know if they owed, but were afraid to receive a bill they couldn’t pay. If you’re pushing off filing your tax returns because you’re concerned about owing taxes, you should understand your options for tax relief. Here are furo ways to get some tax debt help. 1. Pay what you can. No matter what you owe, you are required to file a tax returns on time. Filing an extension will give you more time to file your taxes, not more time to pay your bill, but skipping the extension can lead to harsher penalties. The IRS requires "compliance."

If you don’t pay your taxes, the IRS charges interest on what you owe. You may not be able to afford your whole tax bill, but if you pay a portion of that bill, you’ll cut down on the amount of interest you’ll have to pay on the rest of your owed taxes. The IRS provides Installment Agreements. Before you agree to any payment plan with the IRS, take a moment to consult with an experienced Tax professional. Don't agree to pay more than you need to.

2. Apply for an Offer in Compromise (IRS Settlement) An Offer in Compromise (OIC) allows you to settle your tax debt. One of the major benefits of an Offer in Compromise is that you will pay far less than what you really owe. There are other benefits to an OIC as well, such as avoiding collection calls and letters from the IRS. Our team always advises our clients that they should expect an Offer in Compromise process will be from 10 to 12 months. There are 2 steps involved with an OIC. The first step is the IRS looks for paperwork problems and missing documents. If the agency finds any error, no matter how miniscule, the IRS will reject the OIC submission. This step usually takes 5 months to complete. The second step is the actual examination of the Offer in Compromise. This is when an IRS Examiner looks at the financials and approves or rejects the Offer in Compromise on it's merits. this step also takes 5 months to complete.

Applying for an offer in compromise involves a lot of documentation to prove you can’t afford your tax bill, a $205 application fee and an initial payment toward your bill. While your application is being considered, your payments and fees will be applied to your balance, which you will still need to pay off eventually — even if the IRS agrees to reduce it.

Keep in mind, the IRS approves approximately 42% of the Offers in Compromise submitted. The majority of OIC rejections are due to paperwork problems.


Please note: If you meet the low-income certification requirements, you may not need to pay the application fee or initial payment. You also won’t need to make monthly payments while your settlement offer is being evaluated.

4. Apply for a "Currently not Collectible' status. If you can’t pay their tax liability, you may request to be put into “Currently not Collectible” (CNC) status by the IRS. This "IRS hardship" means the IRS will temporarily delay collection until your financial situation improves. Currently not Collectible usually lasts between 18 to 24 months before the IRS checks back in with the taxpayer. At the end of the 18 to 24 month period, CNC status can be applied for again. While a taxpayer is in CNC status, the Statute of Limitations continues to run out on the IRS. It is possible that CNC will provide a shield from ever paying the tax debt. The criteria for being Currently not Collectible and an Offer in Compromise are nearly the same. One difference is an OIC requires a tax debt be $10,000 or more. CNC status can be any amount. An OIC completely settles the tax debt while CNC keeps the tax liability "alive" and the IRS could pull CNC off the table at any time. (The IRS can also still file a lien against you while you have CNC status.)

To obtain a currently not collectible status, you’ll need to fill out a financial form (433-F) and provide information about your assets, monthly income and expenses. If you qualify for CNC and owe $10,000 or more, our tax pros recommend an OIC be submitted.

Sometimes, our teams have a client placed into CNC status in order to get the IRS off their back while we put together their OIC. 4. Consult a tax relief specialist. Most people are not aware that there are different tax relief options available with the IRS. Quite a few people automatically assume all they have available to them is the Installment Agreement, on which you have to pay the penalties and interest. That's why taking advantage of a free consultation is extremely important.

This article is brought to you by the tax professionals at Flat Fee Tax Relief. Our teams provide tax relief options from coast to coast. For more than a decade, we have provided valuable tax relief help at a very affordable fee.



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