Tax debt resolution does not always mean a taxpayer must pay back the tax debt. Even though the IRS looks to recover the full amount, under certain circumstances, taxpayers can resolve their tax issue without actually paying the debt. However, taxpayers who have the financial capability to pay their tax debt fully will not qualify for any IRS debt payment plans that reduce or postpone the payment of tax debt, such as:
Offer in Compromise is a debt payment plan that allows tax debt reduction so taxpayers can pay the remaining amount to resolve their back taxes. The amount the IRS reduces depends on the financial strength of the taxpayer. Depending on the case, the reduction can be substantial.
Innocent Spouse is an IRS program that allows a spouse to claim ignorance of the understatement of taxes leading to the tax debt. If a spouse qualifies for Innocent Spouse Relief, they are relieved of the liability of paying any amount of tax debt, including the penalties and interest.
Currently Not Collectible is a debt payment plan that allows taxpayers to postpone the payment of tax debt. Only taxpayers who cannot afford to pay any amount of tax debt can achieve relief under this payment plan.
The resolution of tax debt can be achieved by paying little or no amount in back taxes. Taxpayers must, therefore, make efforts to resolve their tax debt and avoid IRS collection actions.