What would you do if the IRS told you that you owed $100,000 and expected you to figure out how to pay it?
Maybe you’ve already lost sleep worrying about the debt. Perhaps you’ve been avoiding the mail, hoping the problem will somehow get better on its own.
If any of this sounds familiar, take a breath. You’re not the first person to face a tax debt this large, and you may have more options than you realize.
In this article we look at five tax resolution options that may help you take control of your debt and move forward with greater peace of mind. If after reading it you still have questions about resolving your tax debt, schedule a free consultation with Powerhouse Tax Resolution.
5 IRS Tax Resolution Options Worth Exploring
Not everyone who owes the IRS a large amount qualifies for the same solution. Here are five options that may be worth investigating.
1. Offer in Compromise: Settle for Less Than You Owe
An Offer in Compromise (OIC) allows qualifying taxpayers to settle eligible federal tax debt for less than the full amount owed.
The IRS evaluates your ability to pay, income, expenses, assets, and other financial information to determine what it could reasonably collect. Owing a large amount alone doesn’t guarantee eligibility.
If your financial circumstances make full payment unlikely, an Offer in Compromise may be worth exploring. A careful evaluation can help determine whether applying makes sense before investing time and money.
2. Installment Agreement: Pay Over Time
If you can afford to make regular payments but cannot pay the entire balance at once, an IRS installment agreement may provide a manageable path forward.
Depending on the agreement and your circumstances, you may be able to spread payments over an extended period. Interest and applicable penalties generally continue to accrue until the balance is paid.
The key is determining what payment amount is realistic for your budget while meeting your ongoing tax obligations. Agreeing to payments you cannot sustain could create additional problems down the road.
3. Currently Not Collectible Status: When You Cannot Afford to Pay
What if paying the IRS would leave you unable to cover basic living expenses?
If your financial situation meets the IRS’s requirements, you may qualify for Currently Not Collectible (CNC) status. This temporarily suspends certain collection efforts because the IRS determines you cannot afford to pay at that time.
CNC status does not erase your tax debt. Interest and penalties generally continue, and the IRS may review your financial circumstances again in the future.
Nevertheless, for taxpayers experiencing genuine financial hardship, it may provide breathing room to stabilize their finances.
4. Penalty Relief: Reduce Certain Additional Charges
Your tax balance may include substantial penalties in addition to the original tax owed.
Depending on the circumstances, you may qualify for penalty relief through options such as First Time Abate or reasonable-cause relief. Eligibility depends on the specific penalties and applicable requirements.
Removing eligible penalties may reduce your overall balance and potentially make another resolution option more achievable.
5. Review the Tax Assessment and Collection Timeline
Before agreeing to pay a large balance, it’s important to understand exactly what you owe and why.
Are all required returns filed? Were payments and credits properly applied? Is the balance accurate? Are there assessment or collection deadlines that could affect your case?
The IRS generally has a limited period to collect assessed taxes, often 10 years, but exceptions, extensions, and suspensions can affect the deadline. Reviewing your account history may reveal important details that influence your resolution strategy.
Which Option Is Right for You?
The amount you owe is only part of the picture. Two taxpayers with $100,000 in IRS debt could qualify for different solutions based on their income, assets, expenses, and financial circumstances.
For example, someone with steady income may benefit from an installment agreement. Someone experiencing financial hardship may explore CNC status, while a taxpayer unable to pay the full balance may consider an Offer in Compromise.
The goal isn’t simply to pay the IRS. It’s to find a resolution strategy that fits your circumstances and protects your financial future.
You Don’t Have to Figure This Out Alone
Owing the IRS $50,000, $100,000, or more can feel overwhelming, but you may have options you haven’t considered.
At Powerhouse Tax Resolution, Nora Riano, an Enrolled Agent authorized to represent taxpayers before the IRS, helps individuals and small business owners in Virginia, Maryland, and nationwide resolve IRS tax problems, in English and Spanish.
Schedule a free consultation today. We’ll discuss your situation, explore potential tax resolution options, and help you take the first step toward resolving your IRS debt.