When you owe tax payments to the IRS, there may be alternative avenues to explore. Find out if one or more of these 5 methods could work to reduce your IRS debt:
#1 Offer In Compromise
– You have to apply for this status from the IRS, see our Offer in Compromise guide here.
– This is for settling your tax debt for less than you owe based on your financial information. Basically it proves that you are unable to pay the full bill.
– If you are barely making it financially each month and don’t own too many assets, your odds are good that you could be approved for an Offer in Compromise.
#2 Penalty Abatement
– This is the process of removing the penalty portion of your tax debt. This can be a significant portion of your money owed.
– You want to do this once you have paid off the base tax amount or are close to it.
– See our guide on IRS penalty abatement to see if your qualify and to see what forms to fill out.
#3 Filing Over Substitute For Returns
– If you have not filed for a given year, the IRS might file for you.
– This means that sometimes the IRS has come up with debts for you based on tax returns you did not actually file.
– You’re almost always better off filing your own return! Filing your own tax returns over those the IRS fills out automatically may result in a zero balance or at least substantially reduce your tax obligation.
– See our guide to unfiled IRS tax returns.
#4 Currently Not Collectible Status
– Only consider if you already know that you do not qualify for an Offer In Compromise.
– If you have too many assets, or if your debt is close to expiring, filing for Currently Not Collectible status can be a way to get out of paying your IRS debt entirely. At the least, it might put it off.
– See our full guide to Currently Not Collectible status here. This is another route where you fill out a form to apply for this status.
#5 Audit Reconsideration
– If you were previously audited but did not agree to it, you might be able to get an audit reconsideration through.
– The IRS is just as capable of making a mistake as anyone else, so going over an audit trail to pinpoint an error might be a wise step.
– See our guide on understanding IRS letters and responses, which includes several steps pertaining to audits.
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