Tax Relief 101: The Basics

Understanding IRS Tax Relief

If you owe the IRS money, you are not alone. Millions of Americans owe back taxes, and the IRS has established several programs to help taxpayers resolve their debts. Understanding your options is the first step toward financial relief.

This guide covers the basics of tax relief — what it is, who qualifies, and what programs are available to you. Whether you owe $10,000 or $500,000, there are legitimate options to resolve your tax issues.

Your Rights as a Taxpayer

Before exploring resolution options, it is important to understand that you have rights. The IRS Taxpayer Bill of Rights guarantees that you are entitled to:

• The Right to Be Informed — You have the right to know what you need to do to comply with tax laws
• The Right to Quality Service — You have the right to receive prompt, courteous, and professional assistance
• The Right to Pay No More Than the Correct Amount of Tax — You have the right to pay only the amount of tax legally due
• The Right to Challenge the IRS Position and Be Heard — You have the right to raise objections and provide additional documentation
• The Right to Appeal — You have the right to a fair and impartial administrative appeal of most IRS decisions
• The Right to Finality — You have the right to know the maximum amount of time you have to challenge the IRS position and when the IRS must conclude an audit
• The Right to Privacy — You have the right to expect that any IRS inquiry will be no more intrusive than necessary
• The Right to Confidentiality — You have the right to expect that information you provide will not be disclosed without authorization
• The Right to Retain Representation — You have the right to retain an authorized representative of your choice
• The Right to a Fair and Just Tax System — You have the right to expect the tax system to consider facts and circumstances that might affect your underlying liabilities

IRS Tax Resolution Options

Offer in Compromise (OIC)

An Offer in Compromise allows you to settle your tax debt for less than the full amount owed. The IRS considers your ability to pay, income, expenses, and asset equity to determine if you qualify. This is ideal for taxpayers who cannot pay their full tax liability. Learn more about Offer in Compromise.

Installment Agreements (Payment Plans)

If you cannot pay your tax debt in full, the IRS may allow you to make monthly payments over time. There are several types of installment agreements, and it is critical that you do not agree to payments higher than what you can comfortably afford. Learn more about IRS Payment Plans.

Currently Non-Collectible (CNC) Status

If paying your tax debt would create a financial hardship, the IRS may temporarily halt collection activity by placing your account in Currently Non-Collectible status. While in CNC status, the IRS cannot levy your wages or bank accounts.

Penalty Abatement

The IRS imposes penalties for late filing, late payment, and underpayment of taxes. These penalties can significantly increase your total debt. If you have reasonable cause, you may request that the IRS remove (abate) these penalties. Learn more about Penalty Abatement.

Innocent Spouse Relief

If you filed a joint tax return and your spouse (or former spouse) improperly reported items or omitted income, you may be relieved of responsibility for the tax, interest, and penalties. Learn more about Innocent Spouse Relief.

IRS Collection Statute

The IRS generally has 10 years from the date of assessment to collect a tax debt. Understanding your collection statute expiration date (CSED) is an important part of any tax resolution strategy. Learn more about the IRS Statute of Limitations.

Common Mistakes to Avoid

1. Ignoring IRS Notices — The IRS follows a predictable collection process. Ignoring notices leads to more aggressive action (levies, garnishments, liens).
2. Disclosing Financial Information Without Guidance — What you tell the IRS can be used against you. Work with a professional before disclosing financials.
3. Falling for "Pennies on the Dollar" Promises — Beware of companies that guarantee settlements. Not everyone qualifies for an Offer in Compromise.
4. Trying to Handle It Alone — IRS resolution is complex. A qualified representative can often achieve a significantly better outcome.
5. Not Filing Returns — You must be in filing compliance before the IRS will consider any resolution option.

Next Steps

The best way to understand your specific options is to speak with a qualified tax professional who can review your complete situation. Colonial Tax Consultants offers a 100% free, confidential consultation that includes a behind-the-scenes IRS check-up to confirm all issues on your account.

Call us at (866) 573-3755 to get started. You can also explore our other free tax relief guides for more detailed information on specific topics.