Resolution Process for IRS Debt

Last updated on February 27, 2023

The resolution process to resolve tax debt varies according to the amount of tax debt, its duration and the debtor’s ability to pay the debt. Most taxpayers under heavy IRS debt choose to pay their tax debt in monthly installments. Even if taxpayers under debt have the financial ability to pay the tax debt in full, they can qualify for an Installment Agreement payment plan that allows them to pay the debt over a period of time.

Usually, the IRS encourages taxpayers to pay their tax debt in a lump sum amount, but they cannot force taxpayers to pay all at once. The resolution process to pay tax debt using  an Installment Agreement involves choosing the most appropriate Installment Agreement payment plan from the various options available, applying for it, and providing the IRS with information they require to ascertain the applicant’s financial strength.

Depending on the amount of tax debt owed, the IRS may or may not need extensive information on financial assets and liabilities. The resolution of an IRS debt case that is well prepared and represented has greater chances of achieving the most benefits for the applicant.

IRS Debt Resolution Methods

The commonality between all resolution processes is to fulfill the eligibility criteria of the payment plan applied for, which vary for every IRS payment plan. Professional representation is important in tax cases, as the tax lawyer may need to negotiate with the IRS to clear the qualifying factors of a payment plan. This is especially true for tax debt reduction plans such as Offer in Compromise and Partial Payment Installment Agreement.

In every tax debt case where the taxpayer is not paying the tax debt amount in a single payment, the taxpayer needs to qualify for a tax debt payment plan. According to the case, a tax lawyer chooses the best payment plan, prepares the case, and presents it before the IRS.

Not all tax debt payment plans are open to every taxpayer under debt. For example, to qualify for an Offer in Compromise, the IRS’ tax debt reduction plan, the applicant must be financially incapable of paying the entire amount, including possessing assets that can be sold to pay the tax debt.

IRS Debt Resolution Outcomes

Choosing Installment Agreement to pay tax debt leads to paying more because of the interest and penalties the IRS charges on the debt amount that remains to be paid. Therefore, taxpayers must pay as much as they can at the start so that they pay a reduced amount in monthly installments. It helps to reduce the interest charged on the debt.

Offer in Compromise has strict qualifying factors and may require negotiations with the IRS. It is advisable to hire a competent tax lawyer or a tax resolution service to prepare and represent the case. If qualified, the IRS reduces the tax debt to an amount that the taxpayer can pay to resolve the debt.