What You Need to Know About IRS Tax Audits

What is the IRS Debt Forgiveness Program?

reviewed by Robin T Young
July 1, 2018

Do you owe the IRS a lot of money? Are you having difficulty paying? If the answer to either of those questions is yes, it’s important to know that you might qualify for the IRS debt forgiveness program.

It’s a good idea to speak to a tax expert if you’re struggling to pay your back taxes. But it’s also beneficial to understand the program and do a little research into it before you make a move.

We’ve written this guide to give you a quick rundown on how the IRS debt forgiveness program works.


The IRS started the Fresh Start initiative in 2008, and this initiative offered taxpayers different programs to help them manage their tax debt. In 2012, they added new provisions that included an expansion of their Offers in Compromise (OIC) program.

This allowed some of the guidelines to relax and made it possible for more people to qualify for debt relief. For some of these programs, people could have longer repayment programs and lower their monthly payment amount.

With the Offer in Compromise program, the IRS is more willing to work with people when they are evaluating their ability to pay back what they owe. This makes it easier for people to qualify for the reduction program.

These changes benefit both the IRS and the taxpayer because the IRS gets the money they probably wouldn’t have otherwise and taxpayers can resolve their debt.

In order to qualify, the IRS has to decide that the amount you offer to give them is the highest it will be within a reasonable period of time. So they will have to look through your income and assets to decide that you’re offering the most you can.

How to Apply for OIC

If you qualify for the OIC program, you have to follow these steps to apply:

  1. Complete the 656 Offer in Compromise form and the 433-A OIC form for an individual or the 433-B OIC form for a business, if applicable
  2. Pay the $186 application fee
  3. Send in your payment

If you meet some low-income requirements, the IRS might even tell you that you don’t have to pay the application fee or the initial offer payment.

Evaluate your tax situation

By evaluating your tax situation, you can identify areas where you may be able to reduce your tax burden and make informed decisions about your financial future.

$125,000 $250,000
I don’t know
$125,000 $250,000

What Are Other Fresh Start Programs Out There?

There are a few other programs that can help a struggling taxpayer pay down their debts. They don’t completely forgive the debt, but they are still helpful.

Tax Liens

The government usually files something called a lien notice when a taxpayer owes on their taxes. The Fresh Start program can increase how much you can owe before they file that tax lien to $10,000.

There are exceptions to this, however.

You can request that the IRS withdraws the tax lien that you received if you submit to a direct debit installment plan.

Installment Agreements

With installment agreements, a taxpayer can set up a certain amount of money to come out of their account every month through a direct debit. This is only available for people looking to pay off $50,000 in debt over a six-year period.

There is a short-term payment agreement for people looking to pay off their debt in 120 days or less or a long-term payment agreement. With the long-term agreement, you pay a small fee.

This is also available for businesses to use, but the amount that they can owe is limited to $25,000.

Tax Forgiveness After 10 Years

Tax forgiveness doesn’t exactly exist. However, there is a statute of limitations for long they can collect from you. This clock starts ticking after the tax is assessed and stops ten years after that.

However, if you’ve ever committed tax fraud, they can collect forever.

The IRS can extend this limit in some cases, like if you file an OIC or if you file for bankruptcy protection.

What to Do if You Can’t Pay

If you owe money to the IRS but you just can’t afford it, even with the Fresh Start programs described above, there are two things you should think about.

Low Realistic Collection Potential

The IRS isn’t going to try to collect a debt from a person that they think falls into a category called “low realistic collection potential” or RCP. When someone has low-income, no bank account, no assets, and no way to pay the money, they generally fall into this category.

The IRS will decide if there is a realistic chance to collect that money eventually. But every case is unique.

They won’t forgive your taxes here, but they also won’t try to collect them.

CNC Status

There’s also something considered Currently Not Collectible status, or CNC. If you are dealing with financial suffering, you could request CNC status. This means that they won’t try to collect your debt for two years.

You will still have to deal with interest and penalties, but you won’t have to worry about the IRS freezing your assets.

IRS Debt Forgiveness Program

While there is no true IRS debt forgiveness program, there are other programs that they offer. These programs attempt to work with the taxpayer to reach an agreement that both parties are happy with. If you find yourself in a situation that you are worried about not being able to pay your back taxes, you need to contact a tax expert.

If you don’t do anything, the IRS can take the funds out of your bank account and garnish your wages. Take the initiative and get them off your back as soon as you possibly can.

For more information about back taxes and tax law, visit us today.

Clinton F Wassor

Clinton F. Wasser, holding a Master of Science in Legal Studies of Taxation, brings a wealth of expertise in tax planning and compliance to his writing. With a career rooted in the workings of the tax landscape, Clinton navigates difficulties with finesse. Beyond his professional accomplishments, he generously volunteers his time to educate high school students about the nuances of taxes. As an author, Clinton marries his real-world experience with a passion for simplifying tax concepts. He has found that his technique empowers readers to better understand the world of taxation.
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