Understanding Your Options for Resolving Tax Debt with the IRS

So what do you do when you get that IRS letter on your counter? There are many people who get panicky and wait for the problem to go away. It never does. That's why IRS Tax Resolutions are created – to provide taxpayers with concrete, structured methods for resolving what they owe. Penalties and interest add up each day you delay. The reassuring part is that the IRS provides several legitimate channels to relief, and most people qualify to avail of a minimum of one. This guide explains these options in easy-to-understand terms. At the end, you will know which way is most suited to you. And if you prefer to get it done right without the uncertainty, Franskoviak Tax Solutions has been working on cases such as yours for over 30 years.

Why You Shouldn't Ignore IRS Debt

Unpaid tax debt isn't just lying around. It is increased by penalties for failure to pay, failure to file, and interest that is compounded daily. The IRS follows a logical series of notices to escalate collection. Ignore enough of them, and you will get a Final Notice of Intent to Levy. That notice may result in wage garnishment, bank levies, or a Federal tax lien on your property.

How the IRS Decides What You Can Actually Pay

The IRS considers your entire financial situation before approving any resolution. This is referred to as your Reasonable Collection Potential. It takes into account your assets (such as your home or car) with equity, monthly expenses, and income. The IRS audit representation doesn't consider your budget when determining what's allowable; it has guidelines. All the choices below are dependent on this one calculation.

Installment Agreements: Pay Over Time

The most popular remedy for tax debt is a monthly payment plan. Disable aggressive collection action immediately. Interest continues to be charged, but the burden is greatly reduced. There are several kinds available based upon your balance:

  • State-backed contracts for smaller loans. 

  • Easy agreements for medium-sized amounts

  • Financial hardship partial payment plans

This is a good choice when your income is fixed, but you can't afford to pay off your balance immediately.

Offer in Compromise: Settle for Less

An Offer in Compromise is a way for qualifying taxpayers to settle their debt for less than what they owe. These are approved by the IRS not because they're the amount you "want" to pay, but because it's a reasonable amount based on your reasonable collection potential. Doubt as to collectibility is the most common category used. However, low acceptance rates continue for self-filed offers due to the documentation requirements. When the offer is prepared with accurate financial statements, it has a much better chance of being approved.

Currently Not Collectible Status

Sometimes it will be a genuine hardship to accept any amount. If so, the IRS may stop all collection efforts. This is known as “Currently Not Collectible” status. You don't get rid of your debt, and interest still accrues. It just gives you some space as you look for a better financial status.

Penalty Abatement: Reduce What You Owe

Penalties can account for a substantial portion of the tax bill. First-Time Abatement eliminates penalties for taxpayers who have a good recent record. If the delay was caused by illness, disaster, or other hardship, then reasonable cause abatement is applicable. This can make your balance a lot smaller.

Innocent Spouse and Injured Spouse Relief

Not all tax debts to a spouse are equitable. Tax Innocent Spouse Relief will shield you from the tax errors of your spouse that you were not aware of. Injured Spouse Relief occurs when a refund is withheld for your spouse's other debt. Specific documentation is needed to establish eligibility for both.

Bankruptcy and Tax Debt

Under certain limited circumstances, bankruptcy may discharge old tax debts. Typically, recent debts and trust fund taxes do not count. This is a good strategy to use in conjunction with other strategies for solving problems, rather than as a stand-alone strategy.

Stopping Levies, Garnishments, and Liens

Enforcement actions that are active may be able to be suspended or terminated after agreeing to a resolution plan. In certain situations, lien withdrawal and lien subordination are also options. The quickness here helps you safeguard your paycheck, bank account, and credit standing.

Choosing the Right Path Forward

There are a couple of considerations to make when choosing:

  • Your monthly income and expenditure patterns

  • A fair share of your home, car, or other valuables.

  • They need to know the total balance due and the age of the debt. 

  • The credibility of your filing and payment record with the IRS is crucial.

These facts are what make you eligible rather than your preferences.

Why Work With a CPA Firm Instead of a Call Center

Numerous "tax relief" firms have commissioned sales agents. That's not the case for Franskoviak Tax Solutions. Our staff is made up of in-house Certified Public Accountants and Enrolled Agents, not salespeople who are reading from a script. We also have many years of experience representing clients in IRS Audits, so you can rest assured you will be covered, regardless of what happens. You should find a Tax Resolution Services Near Me that is capable of being straightforward with you from the start on costs, timelines, and outcomes.

How Franskoviak Tax Solutions Resolves Tax Debt

We begin by taking a look at the full financial picture. Then, we determine which IRS Tax Resolution option has the best chance of achieving the best results for you. You don't have to deal with the IRS directly; we do it for you. Once the issue is solved, we assist you in creating habits that will prevent future tax issues.

Frequently Asked Questions

Can I settle my IRS debt myself?

Yes, but it's specific and doesn't accept errors. Represented by a professional, it is likely that better and faster results can be achieved.

How long do Offers of Compromise take?

The IRS will review most offers and decide on them within several months to a year.

Is IRS tax debt ever set to expire after 10 years?

Yes, in general, up to the Collection Statute Expiration Date, but exceptions may apply.

Will paying off my debt immediately cancel the wage garnishment?

Yes, but only when there is an active agreement or hardship with the IRS.

So what's the difference between an Installment Agreement and an Offer in Compromise?

An installment plan is a way to pay off the entire debt over time, whereas an offer is a way to pay off the debt for less.

Talk to Our Experts Today

Tax debt will only get heavier the longer it remains unpaid. At Franskoviak Tax Solutions, we have been helping people with IRS Tax Resolutions for more than 30 years without any dishonesty or false promises. Call franskoviakcpa.com to schedule a complimentary consultation today. Let's work together to make you go on a journey to financial peace!

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