If a taxpayer is financially unable to pay his/her tax debt in full immediately, they can make monthly payments through an Installment Agreement (IA). The monthly payments are based on how much you owe and how much you can afford to pay each month. An IA is a great solution for taxpayers who have substantial disposable income each month which can allow then to make affordable monthly payments. Interest will continue to grow and there may be applications fees involved, but these pay plans can help you resolve your inability to fully pay your taxes in one payment.

Installment Agreement Guidelines:

• All tax returns must be filed.
• Full financial disclosure.
• Streamline IA: Pay plans set up quickly without full financial disclosure.
  • Individuals that owe $50,000 or less can qualify for a streamline IA.
  • Businesses that owe $25,000 or less can qualify for a streamline IA.

The OIC is a program that allows a taxpayer to settle their delinquent taxes for less than the total amount the IRS claims they owe. The OIC is the most commonly used of all tax resolution programs. And more recently, new OIC guidelines have given even more opportunities to those who previously did not qualify for an OIC under previous program guidelines. These guidelines, when correctly applied, result in taxpayers reaching favorable settlements. If these guidelines are not applied properly, a taxpayer’s OIC may be rejected or, even worse, the taxpayer may overpay.

Offer in Compromise Programs use Form 656:

Doubt as to Collectability
A Doubt as to Collectability Offer in Compromise is negotiated based on a taxpayer’s inability to pay and considers the taxpayer’s current financial position including the taxpayer’s equity in assets.

Doubt as to Liability
A Doubt as to Liability Offer in Compromise allows taxpayers that do not agree that they owe the tax or feel that the tax has been incorrectly calculated, an opportunity to have their tax liabilities reconsidered.

Effective Tax Administration (ETA)
Effective Tax Administration Offer in Compromise is negotiated when there is no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.

Use Form 843 to claim a refund or request an abatement of certain taxes, interest, penalties, fees, and additions to tax.

The IRS may provide administrative relief from a penalty that would otherwise be applicable under its First-Time Penalty Abatement policy. You may qualify for administrative relief from penalties for failing to file a tax return, pay on time, and/or to deposit taxes when due under the First Time Penalty Abatement policy if the following are true:

• 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.

The failure-to-pay penalty will continue to accrue, until the tax is paid in full. It may be to your advantage to wait until you fully pay the tax due prior to requesting penalty relief under the IRS’s first time penalty abatement policy.

Depending on your circumstances, you may be able to wait out your tax obligations and have them wiped from your record. The Collection Statute Expiration Date (CSED) marks the end of the collection period, the time period established by law for the IRS to collect taxes. The CSED is normally ten years from the date of the assessment.

Tax assessments with their own Collection Statute Expiration Date include but are not limited to:

• Original tax assessments from voluntarily filed returns
• Tax assessments arising from amended return filings
• Substitute for Return tax assessments made by the IRS
• Audit assessments
• Civil penalty assessments