IRS Tax Debt: Resolution Methods

Last updated on May 29, 2023

You have various options to choose from when resolving tax debt. Depending on the amount of tax debt you owe and your ability to pay, you can choose a payment plan to pay your tax debt over time if you cannot pay the entire debt in one payment.

The IRS has various tax debt resolution plans and a few of them do not require you to pay the full amount of taxes. To achieve tax debt reduction, your financial condition must be so limited that you are completely unable to pay the full amount of tax debt. Before qualifying a taxpayer for tax debt reduction, the IRS reviews their total income and expenditures.

An Installment Agreement is a popular payment plan, under which a taxpayer can pay their tax debt in fixed monthly installments. This payment plan allows taxpayers the benefit of comfortably paying their tax debt over a longer period of time. At the same time, taxpayers using an Installment Agreement pay more in tax debt due to the penalties and interest charged by the IRS on the tax debt that remains to be paid. To pay less in penalties and interest, taxpayers can pay more upfront to bring down their total tax debt amount.

The IRS also has other tax resolution programs such as Innocent Spouse Relief where a spouse can reduce or remove their responsibility for the tax debt by claiming ignorance of the tax debt. If a spouse did not know about the tax debt and had no reason to know about it, then the IRS may consider putting the entire liability of the payment of the tax debt on the other spouse. Consulting a tax resolution service can be beneficial for successful resolution of a case.