If you owe a large amount of taxes to the IRS, it can seem disconcerting. How will you ever pay back that $10,000 or however much you owe? Many people are unaware of the five strategies that the IRS offers for taxpayers to make good on their debts. If you do owe less than $10,000 you can settle the case on your own; however, if you owe more than that, you should enlist the help of a tax professional to aid you in getting a handle on what you owe without putting yourself into financial destruction. #1. Payment Plan The most commonly used and known way to settle IRS tax debt is to ask for an installment plan. This must be formally applied for with Form 9465 completed either online or in paper form. If you complete the paper form, you must also submit Form 433-F. There are a few stipulations that the IRS requires you to meet in order to obtain the installment agreement: You must have filed all of your tax returns for all previous years; your amount owed must be less than $50,000; and the amount must be paid off in less than 6 years. In some cases, if you have had an installment agreement before, you might undergo more scrutiny and even face a decline of the application for an installment plan, but it is worth trying to apply. #2. Ask for an Extension Getting a tax payment extension is another option that you can take advantage of. If everything goes well, you may get a 45-day extension, or you may also receive as much as a 4 month extension to pay your debts. The amount of extension you receive generally depends on the amount you owe vs. your expenses every month. In order to set this up, you will need to work with an IRS representative. #3. Offer in Compromise An Offer in Compromise is similar to the partial payment agreement. The Offer in Compromise requires you to fill out Form 656 as well as Form 433-A. This agreement allows you to ask for a compromise in the amount of money you owe for taxes. If the request is approved, the amount you pay will settle your taxes in full, even though you do not pay the full amount. There are stipulations on this agreement, however. Moving forward, you must file and pay your taxes on time for the next 5 years. If you fail to do this, your Offer in Compromise could be rejected and the full amount of your tax debt could be reinstated. The Offer in Compromise is usually paid in one lump sum, but if you ask for a payment agreement, it may be approved it is a short amount of time to pay the amount agreed upon. For submitting Offer in Compromise, you require the completion of extensive paper work, which includes full disclosure of your finances, which for many can be both time consuming and tedious. For this matter, you can consult a tax professional. A reputed and licensed professional can advise you both on the probability of your offer being accepted and discuss the terms and conditions of the agreement, based on your particular situation. You should remember that the IRS will reduce the tax debt only when they find that reduced amount is the highest that they are hoping to get. #4. Not Currently Collectible Currently not collectible is not an easy status to obtain, but it is an offering of the IRS. For this status, you need to be able to prove beyond a reasonable doubt that you cannot afford the tax debt. You will need to fill out Form 433-F, which is the Collection Information Statement as well as undergo an evaluation of your financial status. Typically this status requires the assistance of a tax professional in order to be achieved. As long as you are under this status, the IRS cannot come after you in any way, shape, or form for the taxes you owe. If this status continues for 10 years, the 10-year statute of limitations comes into play and you are then no longer liable to pay them at all. #5. Partial Payment Agreement In some cases, the IRS will allow you to have a partial payment agreement, which amounts to a lump sum being paid up front as a good faith payment and the remainder being paid in installments. The difference in this type of installment agreement and the one above is that this IRS debt relief program enables you to pay less than the full amount of taxes owed. The IRS will of course have to approve the amount, but once you fully pay the agreed upon amount, the entire amount of the remaining tax debt is forgiven, meaning you do not owe it any longer. #6. Bankruptcy Filing bankruptcy is the last thing many people want to do, but it is an effective way and getting out of your tax debt if you have no way of paying it. The strict rules of Chapter 7 and Chapter 13 bankruptcy can enable you to get out of your tax debt. Both bankruptcies differ – Chapter 7 allows you to wipe the debt clean without paying anything while Chapter 13 restructures your debt, allowing you to make payments on the debts that you owe. There are strict rules that govern filing bankruptcy and including your income taxes, of which a tax professional (attorney) will be able to assist you. Getting out tax debt is not impossible, especially if you can prove your financial distress. The IRS wants to make it as easy as possible for taxpayers to make good on their debts without feeling undue financial stress. The best way to stay ahead of the game is to pay your taxes throughout the year, but if you find yourself in financial trouble, you can use one of the above strategies to help get yourself out of tax debt once and for all. Please feel free to share this article with others that may also be in financial distress as a result of their tax debts. 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