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When Will the IRS Forgive Tax Debt?

The IRS does offer tax debt forgiveness options that settle your tax debt for less than what you owe. However, eligibility for these programs is based on your financial situation, so not all taxpayers will qualify.

Offers in Compromise

The Offer in Compromise (OIC) program provides tax debt forgiveness if your offer is accepted and you meet all of the terms of your agreement. However, there are many conditions you must meet before your offer will be accepted:

 

  • You need to submit the OIC application and a Collection Information Statement.
  • You must not be able to afford to pay your tax debt in full or make monthly installment agreement payments.
  • You can’t have unfiled tax returns.
  • Your offer amount needs to be at least as much as your Reasonable Collection Potential (RCP).

 

The IRS determines your RCP by looking at your disposable income and equity in assets. Your future prospects are also considered. If you are temporarily unemployed, the IRS may think that you still have some collection potential because you’ll eventually find a job. If you are disabled or retired, your collection potential may be lower.

 

Partial Payment Installment Agreements

 

Partial payment installment agreements (PPIAs) function similar to regular installment agreements. You make monthly payments to slowly pay off your tax debt, and the IRS won’t seize your assets as long as you live up to your agreement.

 

What’s unique about PPIAs is that you won’t end up paying off your full balance. Some of your tax debt will end up being forgiven and you’ll no longer need to make payments.

 

PPIAs are generally an option when you can afford to make monthly payments, but you can’t pay your full balance by the collections statute expiration date. The IRS has 10 years to collection taxes, so you won’t have to make payments once the statute of limitations has expired.

 

PPIAs are harder to get than regular installment agreements. The IRS will want you to liquidate or borrow against any equity you have before accepting a PPIA. However, it’s still better for the IRS to get partial payment than no payment.

Contact an Attorney

Contact a tax attorney if you have IRS tax debt and want to gain a better understanding of your tax debt settlement options. Call Ayar Law at 800.571.7175 for free, no-obligation tax advice from a skilled and experienced attorney

 

Venar Ayar, Esq.

Venar Ayar, Esq.

Attorney-at-Law, Master of Laws in Taxation
Principal and founder, Ayar Law

Venar is an award-winning tax attorney ranked as a Top Lawyer in the field of Tax Law. Mr. Ayar has a Master of Laws in Taxation – the highest degree available in tax, held by only a small number of the country’s attorneys.