Your Guide To IRS Tax Relief Program Options

Your Guide To IRS Tax Relief Program Options


If you have unpaid tax debt, but aren’t able to immediately use your savings to pay it off the moment the IRS contacts you about it, don’t panic. You might be feeling like you’re cornered, out of options, and have nowhere to turn… but nothing could be farther from the truth. In reality, the IRS offers a wealth of different programs and options for taxpayers who want to make their tax debts whole in good faith. The trick is understanding your choices, and deciding which route is best for you in terms of your short term and long term financial outlook.


Understanding IRS Tax Relief Programs

The reasoning behind the IRS offering tax relief programs is simple: they want to get paid. As such, they have a far better chance at actually collecting on your tax debt if they give you a little bit of wiggle room in terms of getting your balance current. That means it’s in the IRS’ best interest to offer several programs that change the amount or payment structure of your payback terms. Today, we’re going to take a look at a few of these, so that you can stop stressing about imagined ultimatums, and instead realize the variety of options set out before you.


Is There A Tax Debt Relief Act?

Let’s set the record straight — other than some legislation that passed around the time of the housing crisis a decade ago, there’s no such thing as the “tax debt relief act” — but many people use this term mistakenly to refer to the Fresh Start Program (more on that in a second).

Furthermore, people may accidentally use the term “tax debt relief act” to refer to another leniency option put forth by the IRS: the IRS Debt Forgiveness Program. In short, this program looks at your life circumstances and determines realistically if you have the means to pay on your tax debt in the near future. In circumstances such as spousal death, catastrophic disaster, sudden job loss, and other unforeseen events, the IRS may decline to collect on your tax debt at all.


Is There A 2018 IRS Fresh Start Program?

In 2013, the IRS unveiled a popular option known as the “Fresh Start Program.” While they eventually stopped using that terminology on more recent publications, many if not most of the guidelines established in the Fresh Start Program still live on today.

This program was hugely popular with taxpayers, because it generally eased the IRS’ internal approach to tax debt collection and gave taxpayers more payment options, including monthly payment plans.

One of the biggest successes of the Fresh Start Initiative was the Offer In Compromise (OIC) program. With an offer in compromise, you are essentially negotiating with the IRS over your tax debt. Rather than pay the full balance, you can submit documents and writing to support reasoning why you can only pay a lesser amount. If your Offer In Compromise is accepted, you’ll fulfill your tax debt obligation without paying the actual amount you owed. Obviously, this program offers huge tax relief potential to thousands of taxpayers across the country, and is one of the main options you should discuss with your tax attorney if you’re seeking tax debt relief from the IRS.


Can You Get Tax Debt Forgiveness After 10 Years?

If you’ve been poking around for information about tax relief options, you might have heard that tax debt forgiveness is possible after 10 years. So, is this optimistic nugget of information actually true?

The answer is: basically, yes. There is one caveat though, which is that your account with the IRS needs to be classified as Non-Collectible Status. Under this status, the IRS essentially figures that — for whatever reason — they cannot collect on your tax debt, despite the fact that you absolutely owe it. This could be due to sudden loss of income, insufficient funds, unemployment, or a whole host of other possibilities.

However, don’t think you can simply plead this case to the IRS if it doesn’t actually represent your real financial picture. The IRS has a calculated estimate of everyone’s ability to pay, known as their Realistic Collection Potential (RCP). They’ll gather data about your financial profile and only switch your status to Non-Collectible if you have an extremely low RCP.

By law, the IRS can’t collect on a debt older than 10 years. And since we know that the only way that the IRS won’t collect on a tax debt is if they literally can’t because the debtor has insufficient assets, it therefore follows that tax debt older than a decade is de facto forgiven. However, the IRS doesn’t exactly see it as forgiveness any more than the credit bureaus “forgive” bad marks that have fallen off of your report due to age.


FAQs About IRS Tax Relief Programs

Your best shot at federal (IRS) tax relief involves staying as informed as possible about the various tax relief programs made available to citizens in this country. Whether it’s a federal tax lien, a levy, or simple unpaid tax debt — the IRS usually offers at least one path toward making them whole in a way that’s not too burdensome. Let’s take a look at a few of the common questions our office hears regarding IRS tax relief programs and the various outcomes they can offer.

  • How much will the IRS settle for?
      • When putting together their Offer In Compromise, many taxpayers want to know about what amount they should aim for, in terms of having a good shot at settlement. However, there is no one-size-fits-all approach, and there is no standard amount or percentage that the IRS will “settle” for. Instead, your best bet is to make a fair and realistic offer based on what you can actually afford. Barring that, it may be worth your time to retain a tax attorney when preparing an OIC, as their experience can be invaluable in terms of minimizing your legal tax obligation.

  • Is there such a thing as “IRS one time forgiveness”?
      • The IRS does have the “One Time Penalty Abatement” policy, which gives taxpayers a one-time break for failing to file or paying late. Additionally, in the rare event that an IRS agent gave you incorrect or improper advice over the phone, you may qualify for a little-known option called “administrative relief.” Keep in mind, except for administrative relief scenarios, your failure-to-pay penalties will keep racking up until the debt is made whole, so it’s still in your best interest to take advantage of whichever program you choose in a timely manner. Either way, you need to be in pretty good standing in order to take advantage of One-Time Penalty Abatement.
      • For One-Time Penalty Abatement, the IRS will require that:
        • You didn’t previously have to file a return or you have no penalties for the 3 tax years prior to the tax year in which you received a penalty.
        • You filed all currently required returns or filed an extension of time to file.
        • You have paid, or arranged to pay, any tax due.

  • Are there tax relief program options for businesses?
      • Yes, even businesses can apply for some tax relief from the IRS. The most common tax relief option for businesses who find themselves with a hefty tax bill is a simple payment installment plan, as this can be utterly crucial in terms of cash flow and realistically being able to pay their debt down without the business folding. When contacting the IRS about a business payment plan, make sure you have all your pertinent info handy, such as your Employer Identification Number (EIN), business established-on date, address on your last tax return, and your caller ID from notice.

  • Can a tax attorney help me find the right IRS tax relief programs?
    • As you’ve seen by now, the amount of IRS tax relief programs is staggering — and some of them are mutually exclusive, meaning you’ll potentially need some guidance to determine which course of action sets you up the best… in both the short and long term. With the guidance of a qualified tax attorney, you won’t have to worry about making the wrong choice and potentially harming your finances or worsening your debt load for years to come. You wouldn’t try to treat your own wound instead of visiting a doctor — so why take a do-it-yourself approach with something as serious and far-reaching as picking an IRS tax relief program?


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