There are taxpayers who cannot afford to pay their entire tax debt amount due to financial constraints. Fortunately, there are payment plans that allow individuals to potentially reduce their liability. It’s important to note that not everyone can qualify for tax debt reduction, as there are strict qualifying factors.
The Offer in Compromise (OIC) is a popular IRS tax debt reduction plan. Taxpayers who can barely cover their basic living expenses may qualify for tax reduction. The IRS considers the income, assets and the liability of a taxpayer to determine their ability to pay. If the debt presents an individual with a financial crisis, the IRS may reduce the amount owed and resolved with a reduced payment.
Due to the strict eligibility requirements for an OIC, it should be considered only if the taxpayer can’t afford to pay the full amount owed. The IRS may charge a penalty if a person applies for a reduction but doesn’t qualify for it.
If a taxpayer cannot pay any amount of the debt, they should apply for Currently Not Collectible, not an Offer in Compromise.