The 5 Ways to Settle Your Tax Debt Problem

IRS Tax Debt Help

Know that if you are dealing with an IRS tax debt can be a very stressful problem. I have had many clients over the years where it has just been too much to actually deal with it.

Here is one case study.

“Jim from Las Vegas:   I owe the IRS about $35,000 for the last five years of my tax returns. The returns are already filed, but I am considering amending the return to take advantage of more tax deductions I missed the first time when I was rushing to get my returns filed on time. I am also reading and hearing about Tax Amnesty. Are there CPA’s or Attorneys who deal only with this tax debt problem? I have seen a more ads than I can remember with each one promising to settle my tax debt to almost nothing.  It all is so confusing.  I just want to try as hard as I can to pay this and get it taken care of ASAP. W

The tax debt problem that Jim and all of my clients face can be taken care of using  one of the 3 following steps.

  1. Decide to handle this yourself or hire a tax professional.
  2. Double check your original tax returns. If you overlooked some deductions, it is always worthwhile to amend past tax returns to lower the amount you owe the IRS.
  3. Choose the tax debt plan that best suits your current financial situation.

Do It Yourself

If owe the IRS less than $10,000 you donaEa„¢t need tax debt help.  You can resolve your tax debts on your own.   The 5 Ways to Get out of Tax Debt are below and you can choose the option that’s best for your current financial situation.

If you owe the IRS somewhere between $10,000-$25,000, this is more serious and you should consider hiring a tax professional  Make sure your original tax returns are accurate, and most importantly, that you will be able to afford the payment plan you set up.

If you owe the IRS over $25,000, you need professional help in settling your tax debt problem.  You need an experienced and qualified tax professional.

Finding a Tax Professional

Ask tax pros about their credentials. A tax professional needs to be a Certified Public Accountant, Enrolled Agent, or tax attorney. Those are the only professionals allowed to practice before the Internal Revenue Service. CPA’s and attorneys are limited to practicing in those states where they are licensed. Enrolled Agents can practice in any state.

Costs of Hiring a Tax Professional.   If you go this route you will be charged either an hourly rate for services rendered, or they will quote you a flat fee for all services. A lot of the work is done upfront and the whole process can take 3 -7 months or sometimes more.  Whoever you hire you want them to focus on strategies and negotiation with the IRS.  Not so much on routine data entry and paperwork. Always ask what paperwork and IRS forms you can fill out yourself, to reduce the fee they charge.

Filing late tax returns and amended returns

If you haven’t filed your taxes, you are generally in a more advantageous position. That’s because you can still take every tax deduction you are legally entitled to in order to reduce your tax liability.  Just know that you must file your back returns and get back into compliance with the IRS before anything can begin to move toward any kind of settlement.


If you’ve already filed taxes, those need to be quickly reviewed to determine if they are accurate and if you were entitled to any further deductions you might have overlooked the first time.  The thing to note here is all returns must be filed and accepted before any sort of negotiations can begin.


After a thorough review of your tax debt problem your tax professional will then be able to advise you on  whether it makes sense to file an amended return.

Tax Debt Strategies

There’s 5 and only 5strategies for settling your tax debt.

  1. Installment agreement: a monthly payment plan for paying off the IRS.
  2. Partial payment installment agreement: a fairly new debt management program where you have a long term payment plan to pay off the IRS at a reduced dollar amount.
  3. Offer in Compromise: a program where you can settle your tax debts for less than what you owe. Requires making a lump sum or short term payment plan to pay off the IRS at a reduced dollar amount.
  4. Not currently collectible: a program where the IRS voluntarily agrees not to collect on the tax debt for a year or so.
  5. Filing bankruptcy: discharge your tax debts under the strict rules of a Chapter 7 or 13 bankruptcy petition.

There’s nothing super secret or special about paying off tax debts. You need to be aware that many of the people involved in this industry are only looking for your credit card.  If a tax pro promises you that they can settle your tax debt for “pennies on the dollar” through an offer in compromise, that person is probably more interested in lining his own pocket or the pockets of the firm they are working for rather than focusing on your very unique financial situation and determining what the best course of action is for you.

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About The Author

TK Bradley

tk bradley is a tax relief expert with many years of dealing with the irs and helping taxpayers to understand their rights and to settle their tax debt problems.