IRS Tax Relief: What are My Options?

If you need IRS Tax Relief, help is available.  Your first step is to notify the IRS if you have trouble paying your tax bill.  Also, make sure you file your return on time, even if you can’t pay the taxes.  If you file late, additional penalties will be added to your total due.  Any amount you send in will help you avoid penalties and interest charges.

The agency may be able to provide some relief such as a short-term extension to pay, an installment agreement or an offer in compromise. In some cases, the agency may be able to waive penalties. However, the agency is unable to waive interest charges which accrue on unpaid tax bills.

Short-term extension

If you need a short-term extension, you can normally make an agreement for up to an extra 120 days to pay the balance in full without occurring any fees.  Interest charges will still apply.

Installment agreement

If you are unable to pay your tax bill within 120 days, you can set up an installment agreement.  You can apply online; if you owe more than $50,000, however, you must call 1-800-829-1040 to set up the agreement.

The fees associated with setting up installment agreements are as follows:

  • $52 for a direct debit agreement;
  • $105 for a standard agreement or payroll deduction agreement; or
  • $43 if your income is below a certain level.

Your monthly payment must be at least $25 and all future refunds will be applied to your debt until it is paid in full.

Offer in Compromise

If you are unable to set up an installment agreement you may propose an Offer in Compromise (OIC).  An OIC is an agreement between a taxpayer and the IRS that resolves the taxpayer’s tax liability by payment of an agreed upon reduced amount.

An OIC is not for everyone.  The fees for applying include a $150 application fee and a non-refundable initial payment.  The amount of the initial payment depends on the payment option that you select.  If you opt for the Lump Sum Cash option, with your application you must send in 20 percent of the total offer amount.  After receiving written acceptance, you must pay the remaining balance of the offer in no more than five installments

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If you opt for the Periodic Payment option, you must send in the same initial payment with your application, however, you must also make monthly payments while you are waiting for a written decision.  If accepted, you continue making payments until it is paid in full.

If you meet the Low Income Certification guidelines, you do not have to send the application fee or the initial payment and you will not need to make monthly installments during the evaluation of your offer.

Financial hardship

If you are unable to pay anything because of a current financial hardship, the IRS may temporarily suspend certain collection actions until your financial condition improves. However, interest and late payment penalties will continue to accumulate.

The IRS recognizes that many Americans are struggling in this economy.  To help more tax payers, the IRS has expanded its programs to help a greater number of tax payers make a fresh start.  The worst thing you can do is avoid the issue.  Explore the options listed above, determine which option best fits your situation and apply as soon as possible.

For more information on IRS Fresh Start Program and how it can help you fix tax problems, check this article.

Visit SuperMoney’s tax relief reviews section for the most comprehensive tax resolution research tool available.