Can the IRS Forgive the Taxes That You Owe Them?

Address tax bills right away to avoid late penalties.

Address tax bills right away to avoid late penalties.

If you've got a big tax bill you can't pay, don't panic. The Internal Revenue Service offers a few options to taxpayers who can't handle their tax debt. While the IRS probably won't forgive your entire tax bill, it can help you manage payments or negotiate a settlement.

Tax Relief Companies

If you've got tax problems, it's best to go straight to the source: the IRS. There are a plethora of companies that offer to help consumers settle their tax debt, but the Federal Trade Commission warns consumers to be extremely wary of these services. Often these companies require you to pay an upfront fee before they even know if you qualify for any tax relief programs. If you get an especially bad company, they may refuse to refund your fee even when you're found not eligible.

Installment Agreement

If you have income but you are having trouble paying down your tax bill, contact the IRS regarding an installment agreement. Taxpayers who owe less than $50,000 can apply for a installment plan with a maximum repayment term of six years. Starting installment payments as soon as possible can help you avoid additional charges for non-payment, like a notice of federal tax lien or a levy.

Offer in Compromise

If your financial situation is more dire, you may qualify for an offer in compromise. Through an offer in compromise, you can negotiate one payment to settle your entire tax bill for less than the current amount. The IRS is stingy with this option; it won't issue you an offer if it believes it can collect the total from you at once or in installment payments. You can prepare and submit an offer on your own or you can hire a tax professional to submit one on your behalf.

Penalty and Interest Abatement

Taxpayers who have suffered a special hardship may qualify for penalty and interest abatement from the IRS. Penalties for late payment can add up to as much as 25 percent of your total tax bill -- not an insignificant sum of money. The IRS is more apt to wipe out penalties than interest fees, although it rarely forgives either. To see if you qualify, contact the IRS-sponsored Taxpayer Advocate Service, which offers free help and guidance in resolving tax issues.

About the Author

Based in San Diego, Calif., Madison Garcia is a writer specializing in business topics. Garcia received her Master of Science in accountancy from San Diego State University.

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