Options to Resolve Problems with the IRS

Tax debt arises from unpaid taxes, unfiled returns, or underreported income, accruing penalties (up to 25%) and interest (8% annually, Q1 2025). The IRS enforces collection via liens, levies, or garnishments. Scorpio Tax Advisors outlines all IRS programs to delay or reduce tax debt payments below.

IRS Programs to Delay Tax Debt Payments

1. Short-Term Payment Extension

   • Extends payment deadline by 120 days for debts up to $100,000 (tax, penalties, interest).

   • Apply via IRS Online Account, Form 1126, or 800-829-1040. No fee; automatic approval if eligible.

2. Installment Agreement (Short-Term)

   • Allows payment over 72 months for debts under $50,000.

   • Apply online (IRS.gov/OPA), Form 9465, or phone. Setup fee: $31–$225, waived for low-income.

3. Temporary Delay of Collection

   • Pauses collection if payment causes significant hardship (e.g., can’t pay basic expenses).

   • Request with Form 433-F or phone; IRS may delay up to 12 months.

4. Penalty Abatement

   • Reduces penalties (not tax) for reasonable cause (e.g., illness, disaster).

   • File Form 843 or letter with evidence; applies to failure-to-file/pay penalties.

IRS Programs to Reduce Tax Debt Payments

1. Installment Agreement (Long-Term)

   • Covers debts over $50,000, paid monthly until the 10-year Collection Statute Expiration Date (CSED).

   • Requires Form 433-F and Form 9465. Fee: $43–$225; may need partial payment.

2. Offer in Compromise (OIC)

   • Settles debt for less than owed based on assets and income.

   • Submit Form 656, Form 433-A/B, $205 fee (waivable), plus 20% of offer or first payment.

3. Partial Payment Installment Agreement (PPIA)

   • Lowers payments for debts exceeding disposable income, unpaid balance may expire at CSED.

   • File Form 9465 and Form 433-F; IRS adjusts every 2 years. No extra fee beyond IA costs.

4. Currently Not Collectible (CNC) Status

   • Suspends collection if payment prevents covering necessities.

   • Prove hardship with Form 433-F or phone; IRS reviews annually. No payments required.

5. Penalty and Interest Adjustments

   • Reduces penalties (up to 25%) or interest (rare) for reasonable cause or IRS errors.

   • Request via Form 843 or letter; interest relief needs proof of IRS mistake.

Other IRS Resolution Options

• Audit Reconsideration: Disputes audit results increasing debt; file Form 1040X or letter.

• Innocent Spouse Relief: Removes joint liability; file Form 8857.

• Bankruptcy: Discharges some tax debts under Chapter 7/13; requires legal filing.

Contact us for assistance!