Guide to IRS Tax Debt Relief Options

IRS Payment Plans

If you cannot pay your full tax bill, the IRS offers several payment plan options.

Short-Term Payment Plan

For those who can pay within 180 days:

• No setup fee (online) or $43 fee (phone/mail)
• Interest and penalties continue to accrue
• Available for balances under $100,000

Long-Term Installment Agreement

For those needing more than 180 days:

Direct Debit Installment Agreement

Lower fees and no risk of missed payments:

• $31 setup fee (online)
• Payments automatically deducted from bank account

How to Apply

• Online: IRS.gov Online Payment Agreement
• Phone: Call the number on your notice
• Form 9465: Installment Agreement Request

Offer in Compromise

An Offer in Compromise (OIC) allows you to settle your tax debt for less than you owe.

Eligibility Requirements

To qualify, you must:

• Be current on all required tax filings
• Not be in an open bankruptcy
• Have a valid extension for the current year (if applicable)
• Show inability to pay the full amount

Types of OIC

1. Doubt as to Collectibility - You cannot pay the full amount
2. Doubt as to Liability - You dispute that you owe the tax
3. Effective Tax Administration - Payment would cause economic hardship

The OIC Process

1. Submit Form 656 and application fee ($205)
2. Include financial documentation (Form 433-A or 433-B)
3. Make initial payment with offer
4. Wait for IRS evaluation (can take 6-12 months)
5. If accepted, comply with all terms

What the IRS Considers

• Your income and expenses
• Your assets and equity
• Your ability to pay over time
• Future earning potential

Penalty Abatement

You may qualify to have penalties reduced or removed.

First-Time Penalty Abatement

The IRS may remove penalties if:

• No penalties in the prior 3 years
• All required returns have been filed
• You've paid (or arranged to pay) any tax due

Reasonable Cause Relief

Penalties may be removed if you had reasonable cause, such as:

• Serious illness or death in family
• Natural disaster
• Unable to obtain records
• Relied on erroneous IRS advice
• Other circumstances beyond your control

Statutory Exceptions

Some penalties have specific exceptions in the tax code.

How to Request

• Call the number on your notice
• Write to the IRS explaining your circumstances
• Use Form 843 for formal requests