If you’re getting letters from the IRS or worried about how you’re ever going to pay your tax debt, you’re not alone. Every year, thousands of people fall behind on their taxes. The good news: the IRS has programs designed to help you resolve your debt and stop the constant stress of collection notices, wage garnishments, and bank levies. If you need help with this or other debt related issues, our Bozeman, MT creditor bankruptcy lawyer is here to help.
At Silverman Law Office, PLLC, we work with clients every day who feel overwhelmed by IRS debt. There’s no one-size-fits-all solution, but there are clear options. The key is knowing which program best fits your financial situation.
Below, we break down the four main ways to deal with IRS tax debt:
- Basic Installment Agreement
- Partial Payment Installment Agreement
- Offer in Compromise
- Currently Not Collectible (CNC) Status
1. Basic Installment Agreement
Think of this like a payment plan with the IRS. Instead of paying the full amount you owe at once, you make manageable monthly payments until the balance is paid off.
What it is: A formal agreement with the IRS that allows you to pay your tax debt in equal monthly payments over time. The balance continues to accrue interest and penalties, but the IRS agrees not to take collection action as long as you make your payments.
Who it works for: People who can afford to pay their debt over time but just need breathing room.
What to expect: The IRS will ask for your financial information, and your monthly payment will depend on how much you owe and what you can afford. In some cases, if your debt is under a certain threshold, you may qualify for a streamlined agreement that requires less paperwork.
Why it helps: Once your installment agreement is approved, IRS collection actions like wage garnishments or bank levies stop, giving you peace of mind.
2. Partial Payment Installment Agreement
This is similar to the basic installment agreement, but with one important difference: you don’t end up paying the full balance. Instead, you make monthly payments based on what you can afford until the IRS’s collection period expires.
What it is: A payment plan where you pay only a portion of your total balance. The IRS accepts reduced payments for as long as you remain eligible, and when the collection statute runs out, the rest of the debt is forgiven.
Who it works for: People who owe more than they could ever realistically pay in full.
What to expect: The IRS will take a detailed look at your income, expenses, and assets. They’ll set a monthly payment you can afford, even if it doesn’t add up to the full debt. You’ll need to provide updated financial information regularly to show you still qualify.
Why it helps: You get relief from collection actions, and in many cases, you’ll pay less than the full balance owed.
3. Offer In Compromise
This is the IRS program that gets the most attention because it can allow you to settle your debt for less than you owe.
What it is: A formal settlement agreement with the IRS where you pay a reduced amount—often in a lump sum or over a short payment period—and the IRS forgives the rest of the debt.
Who it works for: People who truly cannot pay their full tax debt without creating severe financial hardship.
What to expect: The IRS looks closely at your ability to pay, income, expenses, and equity in assets. If they agree that you could never reasonably pay the full amount, they may accept an offer for a reduced lump-sum or short-term payment plan. You must be up to date on tax filings to qualify.
Why it helps: You may be able to wipe out thousands of dollars of tax debt and get a fresh start. But offers are not easy to get; the IRS accepts only those that meet strict standards. Working with an experienced tax professional greatly improves your chances.
4. Currently Not Collectible (CNC) Status
Sometimes the best option is to show the IRS you simply don’t have the means to pay right now.
What it is: A temporary pause on IRS collection activity. The IRS acknowledges you don’t have the ability to pay and stops pursuing collection, though penalties and interest continue to accrue.
Who it works for: People whose income barely covers necessary living expenses.
What to expect: The IRS will review your financial situation, including income and expenses. If approved, your account is placed in CNC status, and the IRS won’t garnish wages or levy your bank account. They may check in later to see if your situation has improved.
Why it helps: It gives you breathing room. While penalties and interest may still add up, the IRS will hold off on active collection. If your finances improve, they can revisit the case, but if the statute of limitations runs out first, you may never have to pay the full debt.
How We Can Help
Each of these options has its own requirements, paperwork, and potential pitfalls. The IRS is not always easy to deal with, and making a mistake on your own can cost you time and money. That’s where we come in.
When you work with a tax professional, we can:
- Stop the harassing letters and calls by handling communication with the IRS for you.
- Review your full financial situation and explain which program you actually qualify for.
- Prepare and submit the right forms, making sure your case is presented in the strongest possible light.
- Negotiate directly with the IRS to secure the best possible outcome.
- Most importantly, we can help you get back your back peace of mind. Instead of worrying every time you open the mailbox, you’ll know someone is fighting on your side to resolve the problem.
Tax debt doesn’t go away on its own, but it also doesn’t have to ruin your life. Whether it’s setting up a payment plan, negotiating a reduction, or showing the IRS that you can’t pay right now, there are real solutions available.
If you’re ready to stop the stress and find a path forward, contact Silverman Law Office, PLLC today. We’ll take the time to understand your situation and help you choose the best option for relief.