Can the IRS Forgive Your Tax Debt?
Written by
Jared Thomas
Published on
January 17, 2024

If you owe back taxes, you may wonder if tax debt forgiveness is possible. While the IRS sometimes eliminates debt entirely, relief programs exist to reduce or restructure what you owe.

5 Potential Tax Debt Relief Options

1. Work With a Tax Relief Professional
  • Tax professionals or firms specializing in IRS debt can negotiate on your behalf.
  • Beware of scams—legitimate firms won’t promise to reduce your debt to “pennies on the dollar”.
2. Apply for an Offer in Compromise (OIC)
  • The IRS may settle your tax debt for less than the full amount if you can’t afford to pay.
  • Eligibility depends on income, expenses, assets, and ability to pay.
  • Applicants must stay current with tax filings and payments to qualify.
3. Request Currently Not Collectible (CNC) Status
  • If you prove severe financial hardship, the IRS may pause collections.
  • Penalties and interest still accrue, but levies and garnishments stop.
  • January 15, 2026
4. File for Bankruptcy (Limited Cases)
  • Certain tax debts may be discharged in Chapter 7 or Chapter 13 bankruptcy.
  • To qualify, debts must be at least three years old and meet other conditions.
  • Payroll taxes and penalties for fraud cannot be discharged.
5. Set Up an IRS Payment Plan
  • The IRS offers installment agreements to make tax debt more manageable.
  • Short-term and long-term plans are available based on how much you owe.
  • Enrolling in a payment plan reduces penalties and prevents aggressive collection actions.

What Happens If You Do Nothing?

Ignoring tax debt can lead to liens, wage garnishments, levies, and passport restrictions. The IRS has extensive collection powers, making proactive action essential.

Conclusion

While full tax debt forgiveness is not as often, options like Offer in Compromise, hardship relief, and payment plans can significantly reduce the burden. If you’re struggling, consulting a tax professional can help you navigate the best path forward.

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