Owing the IRS money is not a position anyone wants to be in, especially when the IRS begins to try and collect on the debt. Tax debt is a common source of debt among many Americans and one that is known to be among the most stressful. The problem with tax debt is that it is very difficult to have settled through third party negotiations or bankruptcy. However, the IRS offers two ways for taxpayers to get caught up on their tax debts without breaking their monthly budget.
The most common tax debt repayment plan is an installment plan, in which taxpayers can arrange to repay their debts over a period of two to three years. To qualify for an installment plan, a taxpayer must (a) be current on their tax returns, (b) owe less than $25,000 and (c) be able to document the ability to pay the installment amount.
Offer In Compromise
For individuals experiencing significant financial hardships, the IRS may grant a settlement agreement called an offer in compromise. Qualifying for an OIC is more difficult than obtaining an installment plan agreement because they are reserved for those are unable to repay their tax debts in full. A taxpayer must present an offer to the IRS for the amount they wish to settle on and the IRS, depending on the income level of the taxpayer, may approve the plan.