IRS Tax Debt Forgiveness Program
Last Updated: July 20, 2022 • 7 min read
Author: Zach L.
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If there is no way that you can pay your tax debt, there are ways for the IRS to accept an offer in compromise (OIC). This allows taxpayers to settle tax debt.
If you’re behind on taxes, it may be time to consider filing an offer in compromise (OIC). It’s an initiative that allows taxpayers with tax debt to pay less than their entire tax liability by accepting a reduced tax bill instead of paying the total amount.
You can make an installment agreement online or call 800-829-1040 (individual) or 800-829-4933 (business).
Internal Revenue Service (IRS) offers a program called Offer in Compromise (OIC)
If you cannot afford to pay your tax debt in full, the Internal Revenue Service (IRS) offers a program called Offer in Compromise (OIC).
An OIC is an offer by the IRS to settle your tax debt for less than what you owe. The remaining of what you owe and what they settle for can be paid overtime or forgiven entirely if it’s not paid within 180 days of their final offer letter.
These agreements allow taxpayers to benefit who have filed returns with errors or other issues with their withholdings if approved. You can take advantage of some relief from those issues so that they won’t negatively impact your ability to file future returns successfully with accuracy.
However, it does not forgive all debts owed at once. They also don’t offer relief from outstanding penalties associated with unpaid taxes under certain circumstances, such as failure-to-pay charges brought against someone engaging in criminal activity. For example, fraudulence may lead them away from filing any additional forms needed later down the line.
Installment Agreement Online
You can apply for an installment agreement online if you owe $50,000 or less in combined tax, penalties, and interest. You can print out a copy of your payment plan so that it’s easier to keep track of payments and fees.
If your income is just under the threshold for applying for an installment agreement (it should be listed on Form 1040-ES), then go ahead and fill out the form online.
Get Help With Your Tax Problem From The IRS
The IRS offers several resources to help people with their tax problems. You can get help from a professional or utilize payment plans or other solutions offered by the IRS.
The IRS offers several options for resolving your unpaid tax debt:
- Tax professionals offer advice on how to deal with your financial situation, including filing an installment agreement or making an offer in compromise (OIC). These tax experts may also be able to represent you in court if necessary. They’re not required to do so, but offering this service is an important part of what they do—and they’re available if you need them
- Payment plans are another way that individuals can resolve their unpaid taxes without going through formal legal procedures like filing bankruptcy proceedings or liquidation proceedings
- These payment plans allow people who owe back taxes but don’t want them hanging over their heads forever (or at least until after retirement)
- They can instead agree on payments within certain parameters over time instead of having those debts written off completely once all payments have been made under one specific set period
Keep Current With Your Taxes While The IRS Considers Your OIC
When you apply for the OIC, the IRS will consider your application and determine whether or not to grant it. For the IRS to process your OIC request, they first need to know that you are current on all of your tax payments.
If they find out that you were not paying or filing your taxes on time and then accepted an offer in exchange for forgiveness of some or all of their outstanding debts, they may reject their offer. You should make sure that when applying for this program:
- File every tax year when required by law. This includes business owners, even if they are not in the financial condition to do so
- Be sure all required forms are filled out correctly, so then you don't have to provide extensive financial details later
- Make sure salaries are reported accurately. If not, you may need either a tax attorney or multiple tax practitioners to help resolve the issue in an audit
The IRS Fresh Start Program Allows Taxpayers to Pay Back Taxes and Avoid Liens
You can use the Fresh Start Initiative to:
- Pay back taxes you owe
- Avoid Federal tax liens on your property
- Reduce the interest charges on tax debts you may have accumulated in the past
What is a Levy?
It's a good idea to not ignore notices from the IRS. If they plan to levy your bank account or wages, act immediately to understand what has happened and make an appeal if necessary. This could be in regard to a missed tax return, IRS issues, or even collection actions.
A levy order is an administrative action by the Internal Revenue Service (IRS) against certain assets of individuals and businesses within the United States who owe back taxes or have filed fraudulent returns. Unless otherwise stated the total debt of the tax balance will be collected, and this is usually the last resort of all payment options.
The IRS uses this method when it cannot collect its debts through other means such as wage garnishment, bank levy, criminal conviction, or the Domestic Relations Order Welfare Rights Act (DORWA).
Complete Form 433-A (OIC) (Individuals) or Form 433-B (OIC) (Businesses)
If you are an individual and have unpaid taxes, you may be able to apply for IRS Tax Debt Forgiveness. To apply for IRS tax debt forgiveness, complete one of the following forms.
- 433-A (Individuals)
- Form 433-B (Businesses)
- Collection Information Statement for Wage Earners and Self-Employed Individuals or its equivalent to submitting with your Offer in Compromise application
Forms 433-A and Form 433-B are available online at the IRS website.
Submit Necessary Information Before OIC
The IRS may require taxpayers to submit certain financial information before considering an offer in compromise (OIC). For example, the IRS will want to know your income, expenses, and assets. This ensures that you can afford to make payments toward your tax debt settlement program offer.
The IRS also requires taxpayers who want a first-time installment agreement (FAI) or Offer in Compromise (OIC) request based on their individual circumstances rather than how much money they owe on their taxes.
The FAI/OIC must be filed with Form 433-A within 90 days after being served with a notice by mail or electronically transmitted through the Electronic Data Gathering System (EDGAR).
Debt Assistance Programs
Several programs are available for taxpayers who get behind on their taxes but want to find types of debt assistance. These include:
- IRS debt forgiveness program
- Offer in compromise
- Installment agreement
The IRS offers two different types of forgiveness: one-time and ongoing. The one-time option involves paying off your tax debt in full. In contrast, the ongoing option allows you to make extra payments over time until all your outstanding balances are paid off completely (or until you file an amended return).
Final Thoughts
The IRS offers a variety of options to help individuals and businesses who owe the government money. These can be broken down from a large lump sum and can be monthly payments or monthly installments. The full amount usually needs to be paid, but the good news is there are ways to find tax debt relief through an IRS program.
For additional information please consult with your tax professional.
