What is Tax Debt? Understanding your IRS Debt and Options

An income tax refund may be the only positive interaction you have with the government all year. But if you have a tax bill to pay and can’t afford it, writing letters to Uncle Sam might not be as much fun. The Internal Revenue Service (IRS) offers a variety of tax debt relief alternatives to taxpayers who are having trouble coming up with the money to settle their tax obligations on a yearly basis. While there are several options of irs tax debt settlement program available, you need to be cautious to prevent yourself from scams. In this article, you will be understanding about tax debt and your IRS tax debt settlement options.

What is Tax Debt?

The term “tax-debt relief” refers to a wide range of programmes that aim to reconcile outstanding debtors with the Internal Revenue Service (IRS).

In most cases, creditors will accept a reduced payment plan or an offer in compromise (debt settlement) as a means of providing relief. The tax debtor’s total financial stability should determine whether option is preferable.

So, it is the relief provided by the government to certain taxpayers who are not able to pay their taxes due to the financial crisis.

Basic Eligibility Criteria of IRS Tax Debt Settlement Program

  • People who owe the IRS money but don’t have the means to pay it (due to a lack of income, savings, investments, etc.)
  • People who owe the Internal Revenue Service money and have been contacted by private debt collectors contracted by the IRS.
  • People who have avoided the Internal Revenue Service’s (IRS) attention by not filing tax returns for some period of time but who are still alive and well.
  • Customers whose tax bill is “seriously overdue” (i.e., $50,000 or more) and for whom the IRS has requested that the State Department refuse, revoke, or seize passports.

To know more about whether you are eligible for the IRS tax debt settlement program, you can consult a company that provides IRS tax debt settlement services.

How can you avail IRS Tax Debt Settlement Program?

Understanding the fundamentals will help ease the stress associated with owing taxes to the government. Online, over the phone, in person at an IRS office, or through the mail are all viable options for determining one’s tax liability. One of the various ways the IRS may assist you pay back tax money is by submitting a tax return or requesting a correction to an existing return. If things get out of hand, don’t be afraid to seek the assistance of a trained expert providing IRS tax debt settlement services.

How a Tax Debt Settlement Company might help you?

  • Find out why the client is late or hasn’t filed their tax return.
  • Collect the appropriate financial data from the client.
  • Give an honest review of the company’s capabilities.
  • Find the most appropriate IRS programme to help the struggling taxpayer
  • Charge a price that is fair and consistent regardless of the service.

Important IRS Debt Settlement Options Available

Your tax debt can be paid off over the course of many months with the help of an instalment agreement (IA). You can pick from two different IAs:

Plan for short-term payments

If you have tax debt to the IRS of less than $100,000 (including penalties and interest), you may qualify for an extension of up to 120 days to pay it off. It costs nothing to set up this kind of payment plan, and you may do so by applying either online, by mail, over the phone, or in person. You can pay your taxes using the IRS’s Electronic Federal Tax Payment System by phone, online (using the E-pay tool), debit/credit card, money order, or check once your application has been authorised (EFTPS).

Plan for long-term payments

A long-term payment plan may be more appropriate if your total debt is less than $50,000 after penalties and interest and you require more than 120 days to pay it off. It has a lengthy payment schedule of 72 months. If your amount is over $25,000, we require that you set up recurring monthly debit withdrawals in addition to accepting direct payments from your checking or savings account.

The initial cost may vary with the chosen form of payment. The setup charge for direct payments is $130 if you apply online, or $225 if you apply by mail, in person, or over the phone. Direct payments can be received as a money order, through the Direct Pay site, or through the Electronic Funds Transfer Processing System (EFTPS). If your adjusted gross income is less than 250 percent of the federal poverty threshold, and you file your taxes as a low-income taxpayer, you may be qualified to have the $43 setup charge reimbursed to you. Setting up debit withdrawals online costs $31, but the charge jumps to $107 if you apply through mail, phone, or in person. If you are a low-income taxpayer, you may also qualify for a fee waiver.

The accrual of interest and fees for late payments applies to both plans. They’ll keep happening until the debt is settled in full.

Innocent spouse relief- Tax Debt Settlement Program

Innocent spouse relief can help those who are unwitting victims of tax fraud or mistakes.

Form 8857, Request for Innocent Spouse Relief, together with any supporting documentation, must be submitted to the Internal Revenue Service in order to petition for Innocent Spouse Relief. In order to be considered, the request must be made no later than two years after the IRS made its first collection attempt.

Take into consideration that the Internal Revenue Service may take up to six months to make a decision after receiving your request. Therefore, availing irs tax debt settlement services will be beneficial and help you avoid facing the stress of rejection after six months.

IRS Fresh Start Initiative

The IRS’s Fresh Start Initiative was already enticing troubled taxpayers into compliance through instalment agreements and offers in compromise settlements. However, the expanded programme that is IRS Forgiveness Program is even more welcoming, making it simpler than ever to qualify for instalment programmes or offer in compromise settlements.

Other Debt Relief Options under Tax Debt Settlement Program

Income tax obligations that are at least three years old can be discharged in Chapter 7 bankruptcy, but only under certain circumstances.

The statute of limitations may also be used to cancel off tax debt. For taxes that the IRS has tried to collect but has been unable to do so, the statute of limitations period expires after 10 years.

Instead of taking such drastic action, you may try reaching out to a professional tax debt reduction firm for help. They might be able to intercede to stop any pending or future liens, bank account seizures, or wage garnishments.


In conclusion, there are several tax debt relief options available. However, you need to make sure you apply to correct one and through a proper procedure.