Most taxpayers believe that a tax debt is a true burden if they don’t have the financial capability of paying it in full. Even though IRS tax debt reduction payment plans are difficult to qualify for, taxpayers with a verifiable inability to pay may qualify for some type of settlement.

In order to resolve back taxes using a reduction plan, you need to first determine which plan you qualify for and whether or not you can fulfill its resolution requirements. The most popular tax debt reduction plans are the Offer in Compromise and the Partial Payment Installment Agreement. Though each has different qualifying factors, both plans require applicants to reveal their income and expenditures. This is done to ensure that the taxpayer is able to meet basic living needs after the collection of back taxes and to determine if he or she would be facing a financial hardship as a result of the liability.

Applying for an appropriate payment plan is important for a successful resolution. Applying for a payment plan that you clearly cannot qualify for can create a penalty. Therefore, carefully consider all the resolution requirements you have to meet before applying. Keep in mind that the IRS does not look favorably upon defaults and may not reinstate a plan if you cannot provide a valid explanation for the lapse.

Tax debt reduction plans are highly beneficial resolution options for those in financial distress, but they must be used after careful evaluation of the tax case, eligibility requirements, and resolution guidelines.