How to Choose the Right IRS Tax Relief Program

Selecting the right tax relief program depends on your financial situation, the amount you owe, and your ability to pay. This guide will help you understand which program is best for you.

Decision Framework

The IRS follows a specific priority when evaluating relief programs. Understanding this hierarchy helps you focus on the most appropriate option for your situation.

Can You Pay in Full?

If you can pay your tax debt in full immediately or within 180 days, the IRS expects full payment. Consider using savings, borrowing, or selling assets before applying for relief programs.

Can You Pay Over Time?

If you can pay the full amount over 6-72 months with manageable monthly payments, an Installment Agreement is the best option. This is the IRS's preferred relief program.

Learn about Installment Agreements

Can You Afford to Pay Anything?

If your income barely covers necessary living expenses, you may qualify for Currently Not Collectible status. The IRS temporarily pauses collection while you're in financial hardship.

Learn about CNC Status

Can You Settle for Less?

If you'll never be able to pay the full amount due to permanent financial hardship or asset/income limitations, an Offer in Compromise allows you to settle your debt for less than you owe.

Learn about Offer in Compromise

Key Questions to Ask Yourself

Answer these questions to narrow down your best option:

Do you have significant assets?

If you own a home with equity, investments, or valuable property, the IRS will expect you to use these to pay your debt before approving relief.

What is your monthly disposable income?

Calculate: Monthly Income - Allowed Living Expenses = Disposable Income. This determines your payment capacity.

Is your financial situation temporary or permanent?

Temporary hardship (illness, job loss) = CNC Status. Permanent issues (disability, age) = Offer in Compromise.

How much time is left on the collection statute?

The IRS has 10 years to collect. If you're close to the end, CNC status may let the clock run out.

Common Scenarios

Scenario 1: Stable Income, Can Afford Payments

Example: You owe $25,000, earn $5,000/month, and after expenses have $400/month available.

Best Option: Installment Agreement (IA)

You can pay off the debt in 72 months at $347/month. This is the cleanest solution with no credit damage and the IRS will approve it quickly.

Scenario 2: Temporary Financial Hardship

Example: You owe $40,000 but lost your job. You're living on unemployment and can't afford any payments right now.

Best Option: Currently Not Collectible (CNC)

The IRS will pause collection until your financial situation improves. Interest continues to accrue, but you won't face levy or garnishment actions.

Scenario 3: Never Able to Pay Full Amount

Example: You owe $80,000, are retired on fixed income with no assets, and can only afford $150/month which would take 44+ years to pay off.

Best Option: Offer in Compromise (OIC)

The IRS will calculate what they can realistically collect from you (based on assets + future income) and may accept a settlement of $15,000-$25,000 to close the case.

Scenario 4: High Debt, Some Assets

Example: You owe $100,000, have a home with $50,000 equity, and $300/month disposable income.

Best Option: Combination approach

You could offer the IRS $50,000 (asset value) + 12-24 months of disposable income ($3,600-$7,200) = $53,600-$57,200 total Offer in Compromise. This settles the debt without liquidating your home.

Warning Signs You Need Help

Seek professional help if:

You've received a Notice of Intent to Levy
Your wages are being garnished
The IRS has filed a tax lien against you
You owe more than $50,000
You're unsure how to complete Form 433-A or 656
Your OIC or IA application was previously rejected

Next Steps

Ready to get started? Follow these steps:

Complete your financial analysis on the dashboard to see which programs you qualify for
Review the detailed requirements for your recommended program
Gather required financial documents (pay stubs, bank statements, bills)
Start your application using the Essential tools
Consider upgrading to Automated Relief for AI-powered form filling

Still unsure which program is right for you?

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