If you find yourself struggling with unpaid taxes, it’s important to know that you have options. The IRS offers several IRS debt relief programs to help taxpayers settle their debt, avoid penalties, and create manageable repayment plans. Whether you choose to work with a tax relief company or negotiate directly with the IRS, understanding your options can help you take control of your financial situation.

What Is IRS Debt Relief?

IRS debt relief refers to the different programs and options available to help taxpayers reduce or manage their unpaid taxes. The IRS understands that not everyone can pay their tax debt in full, so they offer solutions that allow taxpayers to:

• Set up payment plans to pay off their debt over time
• Negotiate settlements for less than the full amount owed
• Temporarily delay collections if they are experiencing financial hardship
• Request penalty relief if they have a valid reason for missing tax payments

Each IRS debt relief program has specific qualifications, and not all taxpayers will be eligible for every option. Below, we explore the most common methods for settling IRS tax debt.

Options for IRS Debt Relief

Offer in Compromise (OIC) – Settle for Less Than You Owe

An Offer in Compromise (OIC) allows qualifying taxpayers to settle their IRS debt for less than the total amount owed. The IRS considers this option when it determines that full payment would create financial hardship or that the amount owed may not be fully collectible.

To qualify for an OIC, the IRS will assess:

• Your income and expenses
• The value of your assets
• Your overall financial situation

If you are approved, the IRS will accept a reduced payment as full settlement of your tax debt. However, not everyone qualifies, and applying requires extensive documentation. If you think you may be eligible, working with a tax professional could help improve your chances of approval.

Installment Agreement – Pay Over Time

If you cannot afford to pay your tax debt in a lump sum, the IRS allows taxpayers to set up an installment agreement to pay off their balance in monthly payments.

Types of Installment Agreements:

• Short-term plan: If you owe less than $100,000, you may qualify for a short-term payment plan (up to 180 days) without an application fee.
• Long-term plan: If you owe $50,000 or less, you can apply for a long-term monthly installment plan with a $22 setup fee for direct debit payments.

While this option makes payments more manageable, keep in mind that interest and penalties will still apply until the full balance is paid.

Temporary Delay in Collections

If you’re facing extreme financial hardship, the IRS may place your account in “Currently Not Collectible” (CNC) status, which temporarily stops collection efforts like wage garnishment or bank levies.

To qualify, you must prove that you cannot afford basic living expenses while paying your tax debt. While this does not eliminate your debt, it provides temporary relief and gives you time to improve your financial situation.

Penalty Abatement – Reduce or Remove Penalties

The IRS imposes penalties for late tax payments and late filings, but in certain cases, taxpayers can request penalty abatement, which eliminates or reduces these extra charges.

Common reasons for penalty abatement include:

• Serious illness or hospitalization
• Natural disasters
• Unexpected financial hardship
• First-time penalty forgiveness (for taxpayers with a clean compliance history)

While penalty abatement won’t reduce the actual tax debt, it can significantly lower the total amount owed by removing additional fees.

Hiring a Tax Relief Service

If navigating IRS debt relief options feels overwhelming, you may consider hiring a tax relief company. These companies specialize in:

• Negotiating with the IRS on your behalf
• Applying for offers in compromise
• Setting up installment agreements
• Stopping IRS wage garnishments and bank levies

However, not all tax relief companies are reputable. Be cautious of companies that charge high upfront fees or promise to eliminate your debt entirely—only the IRS has the power to approve settlements. Before hiring a service, check reviews and ensure they have licensed professionals like Enrolled Agents, CPAs, or tax attorneys.

DIY IRS Debt Settlement

If you prefer to handle your tax debt on your own, you can contact the IRS directly and:

• Set up a payment plan online
• Submit an Offer in Compromise application
• Request penalty relief by phone or mail

While this approach requires more effort, it saves money on tax relief fees and allows you to communicate directly with the IRS about your financial situation.

How to Choose the IRS Debt Relief Option

The best IRS debt relief solution depends on your financial situation and ability to pay.

• If you can afford to pay over time, an installment agreement may be the best choice.
• If you’re facing serious financial hardship, you may qualify for an offer in compromise or a temporary delay.
• If you have large penalties, requesting penalty abatement could help lower your total balance.
• If you need help navigating IRS programs, a tax relief service may be useful—but choose carefully to avoid scams.

Final Thoughts

Dealing with IRS tax debt can feel overwhelming, but taking action is the first step toward financial recovery. The worst thing you can do is ignore the problem, as it will only grow with penalties and interest.

By understanding your IRS debt relief options—whether it’s setting up a payment plan, negotiating a settlement, or seeking professional help—you can regain control of your finances and work towards becoming debt-free.

If you’re unsure where to start, consider calling the IRS directly or consulting a trusted tax professional to explore the best path forward.