The IRS looks to recoup the most it can from a taxpayer when collecting a tax debt. However, taxpayers can explore all IRS payment options to help them achieve a favorable resolution. Depending on their tax case, taxpayers should consider paying their tax debt in monthly installments, postponing the payment of tax debt, trying to achieve a reduction in tax debt and/or IRS penalties, or claiming innocence for taxes owed.
Taxpayers should know what their true financial capacity is to pay the IRS, to be able to apply for the appropriate IRS payment plan. The most commonly used tax debt resolution plan is the Installment Agreement. This program allows taxpayers to pay their tax debt in fixed monthly installments to fulfill their tax debt over an extended period of time. Though taxpayers are charged interest and penalties by the IRS until the entire tax debt amount is satisfied, they are still able to achieve a tax debt resolution even if they are unable to pay the entire debt in a single payment.
Some of the more difficult tax debt resolution plans to qualify for involve tax debt reduction. These plans have strict qualifying factors that only taxpayers who are in financial difficulty can meet when seeking a reduction in tax debt. The IRS requests and reviews the financial situation of a taxpayer, including all assets and liabilities, to determine their financial strength. Tax debt reduction plans are highly beneficial for those who seek a tax debt resolution, but are unable to pay the entire debt amount.
If the IRS is unable to recover any amount of tax debt, they put the tax debt under Currently Not Collectible status, which means that a taxpayer is not required to pay anything towards their tax liability in their present situation. The IRS will review the financial situation at a later date to see if there are any improvements in the financial condition of a taxpayer.
It is advisable and wise for taxpayers to consult a licensed tax professional or a tax company to explore options, as they have the knowledge of IRS policies, tax laws and codes, and experience in dealing with the IRS necessary for achieving a fast, smooth and favorable tax debt resolution.