Struggling with IRS Tax Debt? Here Are 5 Ways to Resolve It

Facing the IRS can be overwhelming, but you don’t have to do it alone. In our latest 5 on Fridays video, managing attorney Mark Milton breaks down the five primary methods for resolving your IRS tax debt. Whether you can afford to pay in full or need a fresh start, there is likely a path forward for you.

1. Pay in Full (With a Catch)

It’s the option no one wants to hear, but if you have the assets and income, paying the debt in full is the fastest way to stop the accrual of interest. However, before you write that check, you should always check for Penalty Abatement.

• First-Time Abatement: If you have a clean history of compliance for the past three years, you may be able to have failure-to-file or failure-to-pay penalties removed.

2. Set Up a Payment Plan (Installment Agreements)

If you can’t pay all at once, the IRS offers different types of installment agreements:

• Full Pay Installment Agreement: You agree to pay the total balance over a set period, typically 72 months.
• Partial Pay Installment Agreement: Based on your financial situation, you pay what you can afford each month until the debt expires or your financial status improves.

3. Currently Not Collectible (CNC) Status

For those in significant financial hardship, Currently Not Collectible status is often considered the “Holy Grail.” If your monthly income is entirely consumed by allowed living expenses, the IRS may temporarily stop collection activities.

While the debt remains, this can provide much-needed breathing room while the statute of limitations on the debt continues to run.

4. Offer in Compromise (OIC)

The Offer in Compromise allows you to settle your tax debt for less than the full amount you owe. While it sounds like a dream, Mark warns that it is a rigorous process.

“Be aware of traps. Many groups promise an OIC, take your money, and then 24 months later, the IRS rejects it. Always talk to a professional who will give you a realistic assessment.”

5. Bankruptcy

In specific cases, certain tax debts can be discharged through a Chapter 7 No-Asset Bankruptcy. Generally, the debt must be more than three years old and meet several other strict criteria. This is a complex legal area that requires a deep dive into your financial history to ensure you qualify.

Don’t Face the IRS Alone

Tax debt doesn’t go away on its own, but with the right strategy, you can put it behind you. At Milton Law Group, we specialize in helping individuals and businesses navigate these complex programs to find the best possible resolution.

Ready to find your solution? Contact Milton Law Group today for a consultation.