Tax debt is one of the biggest financial problems for people in the United States today. When you owe money to the Internal Revenue Service, there are a few ways that you could potentially get out of the debt. You should be able to access an installment plan with the IRS. Some people can also qualify for an offer in compromise which is like settling the debt that you have with the IRS. Exploring all of your options is important so that you can make the best decision for your situation.
Assess your tax situation to determine what would be the best possible course of action. If you have a substantial amount of debt that you do not believe you would ever be able to repay, considering an offer in compromise may be your best solution. If you only have a small amount of debt with the IRS, you could potentially pay it off through an installment agreement.
Pursue a payment plan with the Internal Revenue Service. If you owe less than $25,000 to the IRS, you can fill out an online payment agreement form on the IRS website. For this process, you will simply have to provide some basic financial information and tax information to the IRS. If you owe more than $25,000, you can still apply for an installment agreement through Form 433F. (See References 2) Once you set up the agreement, the money can be deducted automatically from your bank account or you can send payments to the IRS.
Apply for an offer in compromise (OIC) with the Internal Revenue Service. An offer in compromise is a procedure that allows you to pay less than what you owe to the IRS. The IRS will consider an offer in compromise with you for three different scenarios. If they doubt that they can collect the entire amount or if there is some doubt as to whether you actually owe the entire amount, they would consider an offer in compromise. If imposing the collection of the tax would cause undue financial stress, they may also consider it. You can pay in a lump sum or through a periodic payment plan. You will need to fill out Form 656 with the IRS to have an offer in compromise considered.
Stick to the terms of your agreement with the IRS. Whether you chose to pursue a payment plan or an offer in compromise, you must stick with the terms to take advantage of the programs. If you do not make your payments as scheduled, the IRS could impose extra fees or could remove you from the program.