IRS Federal Tax Debt Settlement Programs
Installment Agreement By negotiating a tax Installment Agreement (IA) with the IRS, you can repay all, or part, of your total back tax liability through manageable monthly payments.
The specific monthly payment is based upon how much you owe and how much you can afford to pay. However, negotiating your payment will require a full disclosure of your and your spouse's financial information.
Additionally, as with all IRS tax relief programs, you can only enter into an agreement if you have filed all your necessary federal income tax returns.
Full Payment The fastest way to resolve owed back taxes is by paying them in full. This includes paying the interest and penalties that have been assessed by the IRS back.
These penalties and interest can quickly add thousands of dollars to your tax liability as they are constantly accruing. If you intend to fully repay the IRS then you should try to do so as soon as possible to avoid additional expenses.
Streamlined Installment Agreement This is a special type of Installment Agreement. Again, the Streamlined Installment Agreement (SIA) is just a monthly payment paid to the IRS to address your back tax liability.
The difference is how it is calculated. An IA is based upon a comparison of income to expenses. An SIA is based upon how much you owe.
So long as you owe less than $25,000 and the tax liability will not expire in less than five years, you qualify for this payment plan.
Offer in Compromise The final settlement program offered by the IRS is an Offer in Compromise (OIC). With an OIC you submit an offer to the IRS detailing what you can afford to pay in a lump sump.
If the IRS accepts then by submitting payment you will resolve your tax debts. However, submitting an OIC requires disclosure of extensive financial information in order to prove that you could not repay your taxes fully over the next 4 or 5 years even if the IRS forced the sale of all assets that you currently own.
Placement on CNC Status If you cannot afford to pay on your IRS back taxes at all, then you might qualify for placement on the IRS' Currently Not Collectible (CNC) status. However, you will need to prove to the IRS that your monthly necessary living expenses exceed your monthly income.
Innocent Spouse This is a very limited form of tax debt resolution. It is only applicable when one's spouse files a joint tax return which accrues a tax liability without any knowledge on the part of the other spouse of what caused the underlying IRS tax liability.
Although it is very limited, it is one in the best forms of tax debt resolution because it completely eliminates the debt, interest, and penalties from the innocent spouse's IRS account. However, the "non-innocent" spouse still needs to seek a different form of resolution.