Let’s face it: taxes are as much fun as a root canal without anesthesia. And owing taxes? That’s like discovering your dentist moonlights as a chainsaw juggler. Never fear! The IRS has a few tools to help you deal with tax debt—and understanding them can be your first step toward freedom (and a lot less stress).
Here are the three ways the IRS handles debt, with a little bit o’ humor because that always helps.
1. Offer in Compromise (OIC) – The IRS’s Version of “Let’s Make a Deal”
Do you think you could walk into the IRS’s office, shot them a toothy grin, and say, “How about we settle this for half?” That’s basically what an Offer in Compromise is—except you’ll need more than charm to get a “YES”.
The Secret: The IRS doesn’t hand these out easily, or quickly. You’ll need to prove behind a shadow of a doubt that paying the full tax bill would leave you so broke you’d be living on dog food. The IRS will look closely at your income, expenses, and net assets to decide if you qualify for the golden ticket.
Pro Tip: The IRS has a great online tool to see if you’re eligible, but know that navigating the process/paperwork can feel like assembling IKEA furniture without the instructions. A tax pro can help you avoid missing the important screws.
2. Currently Not Collectible (CNC) Status – Hitting the IRS Snooze Button
Imagine telling the IRS, “Hey, I can’t pay you right now, could you come back later?” They might actually say yes! That’s what Currently Not Collectible status is—putting your debt in Time-out while you get back on your financial feet.
The Secret: It’s not forgiveness. Interest and penalties still pile up, like laundry in a college dorm. Know that the IRS will periodically check in on you to see if your financial situation has improved, i.e. increased income.
Pro Tip: To get in this Time Out, you’ll need to show the IRS that paying your tax bill would mean skipping essentials—like rent, groceries, or your Hulu subscription. Make sure your ducks are in a row before making the request.
Pro Tip: The best part of CNC Status is that the IRS’s clock keeps running. That’s right, the collection period of 10 years is not paused while in CNC. So if you stay in Time Out for 10 years, the debt is gone.
3. Installment Agreements – Just like eating an Elephant.
Can’t pay your tax debt in one big bit? No problem, the IRS will take smaller bites with an installment agreement. You can nibble away at your balance one manageable payment at a time.
The Secret: If your debt is $50,000 or less, you can apply online and skip most of the usual red tape. Less Paperwork = Less Headache. If it’s more than that, you’ll need to submit a financial deep dive that would make Sherlock Holmes stand up and cheer.
Pro Tip: Don’t let the IRS pressure you into paying more than you can afford each month. A good tax professional can help you strike a deal that won’t leave you eating ramen (unless you like ramen, in which case, carry on).
Take Control of Your Tax Debt (and Maybe Sleep Better at Night)
Tax debt may be scarier than a bad haircut, but it’s not the end of the world. The IRS actually wants to work with you—they’re not out to leave you living in a cardboard box—just don’t ignore them.
Whether you’re looking to negotiate an Offer in Compromise, obtain Currently Not Collectible status, or want to set up an Installment Agreement, there’s hope.
At Tax Rescue CPA, we specialize in turning tax nightmares into manageable plans. So, take a deep breath, put down that stress ball, and give us a call. We’ll help you tackle the IRS with confidence—and maybe even crack a smile along the way.
Contact us today and leave the past behind!
“Who’s Doing Your Taxes?” – Tax Rescue CPA
