If you’re struggling to figure out how to pay your tax debt balance, you may have more options than you realize. The IRS wants to help you resolve your tax debt, not make your life harder. That’s why there are so many different options for tax relief, ranging from installment agreements to innocent spouse relief and more.
But with so many options available to resolve and relieve your tax debt, how do you know which option is right for you? And then, how do you know which forms to file? This guide will walk you through all the IRS tax relief forms available and help you decide which one is ideal for your situation. If you’re still not sure which tax relief form you need, a tax professional can help.
To get help now, contact us at Wiggam Law. We’ll help you decide the best steps forward for your situation. In the meantime, here’s an overview of the most common tax relief forms.
Installment Agreement
Form 9465 allows you to request a monthly installment agreement if you can’t pay your balance in full. You can use Form 9465 to request an installment plan if you:
- Owe income tax on Form 1040 or 1040-SR.
- Are responsible for a Trust Fund Recovery Penalty.
- Owe employment taxes on Forms 941, 943, or 940 for a sole proprietorship that is no longer active.
- Owe an individual shared responsibility payment under the Affordable Care Act.
You are likely to receive an installment agreement if you:
- Owe less than $10,000 in taxes.
- Have filed all required income tax returns and paid all income tax due on time for the last five tax years.
- Haven’t had an installment agreement with the IRS in the last five years.
- Agree to pay the full amount within three years and comply with all tax laws for the duration of the agreement.
- Are financially unable to pay the debt in full.
In most cases, as long as you’ve historically been compliant with the filing requirements, you can set up a payment plan on up to $50,000 in tax debt as long as you pay it off within six years. For higher amounts of debt, the IRS will only approve payments if you submit a collection information statement (details on that form below).
You should not use Form 9465 if you:
- Can pay the full amount in 120 days. If that’s the case, call the IRS at 800-829-1040 to request a short-term payment plan, which voids the installment fee.
- Want to request a payment plan online. Go to the IRS website to do this. You can only apply online if you owe less than $50,000 and can pay at least $25 per month.
- Owe employment taxes for a business that is still operational. Call the phone number on the notice you received to start an installment agreement.
Once you apply, the IRS will let you know within 30 days if your application is approved. If the arrangement is for taxes due after March 31st, it may take more than a month to receive a reply.
Partial Payment Installment Agreement
If your tax debt is too much to pay even with an installment agreement, you can apply for a partial payment installment agreement instead. This type of installment agreement forgives part of the amount due, so your balance is smaller.
You must use two forms to apply for this type of agreement: Form 9465 Installment Agreement Request and Form 433-A Collection Information Statement. Your application needs to include detailed financial information to demonstrate that you have a financial need for the agreement.
If you have no other installment agreements and have paid and filed taxes on time for the last five years, then you’re eligible to apply for a partial payment agreement. If you have filed for bankruptcy, then you can’t apply.
Short-Term Payment Extension Due to Undue Hardship
You might be able to get a short-term payment extension if you owe taxes that would cause an undue hardship if you paid them in full. “Undue hardship” means you’ll have significant financial losses if you pay your taxes on time – such as having to sell your car or house to pay the balance.
To get a short-term payment extension, file Form 1127 (Application for Extension of Time to Pay Tax Due to Undue Hardship) as soon as you know you won’t be able to pay on time. You must file the form by the date your taxes would normally be due.
The length of the extension depends on the type of balance. If it’s a balance shown on a tax return, then you may get an extension of up to six months. For balances that come from having your taxes assessed by the IRS, you may get 18 months and possibly an additional 12 months in certain circumstances (which the IRS does not publish in detail).
Offer in Compromise
An offer in compromise is an agreement that lets you settle your tax debt with the IRS for less than you actually owe. You need Form 656 (Offer in Compromise), plus either Form 433-A-OIC (Collection Information Statement for Wage Earners and Self-Employed Individuals) or Form 433-B-OIC (Collection Information Statement for Businesses) to apply.
You are eligible to apply for an offer in compromise if you:
- Have filed all tax returns and paid all other taxes due.
- Have no bankruptcy open.
- Have a valid extension for this year’s return.
- Are an employer who has made the past three tax deposits.
Usually, the IRS will only approve an offer if it is equal to at least the amount the agency would be able to collect if it enforced collection actions against you. For instance, if the agency seized your assets and garnished your wages, would they get a larger payment than the offer you’re making? If so, you may need to consider a higher offer. A tax professional can help you narrow in on the right number.
Penalty Abatement
To apply for an abatement, you must use Form 843 (Claim for Refund and Request for Abatement). You can use this form to request:
- A tax refund (unless it’s a type of tax that requires a separate form).
- A tax abatement (other than income, estate, gift, FICA, RRTA, or income tax withholding).
- A refund of excess social security or Medicare tax withholding.
- A refund of tax interests or penalties caused by an IRS error.
- A refund of penalties due to reasonable causes.
- A refund of the penalty for misuse of dyed fuel.
- A refund of tier 1 RRTA tax for an employee.
- A refund of branded prescription drug fees.
If your request is rejected, you can appeal in writing.
IRS Uncollectible Status
You may be required to submit Form 433-F (Collection Information Statement), Form 433-A, or Form 433-B to demonstrate uncollectible status. The IRS uses these forms to determine if you can satisfy your tax liabilities or not. This form can accompany other IRS tax relief forms, such as the Form 9465 Installment Agreement Request, or you may file it on its own.
This form will collect all of your pertinent financial information, such as:
- Accounts
- Lines of credit
- Real estate
- Assets
- Employment
- Non-wage income
- Monthly living expenses
IRS uncollectible status is also frequently referred to as hardship status or currently not collectible status (CNC status). If you qualify for CNC status, the IRS will pause collection actions against you. You won’t have to make payments, and you won’t have to worry about the IRS bringing collection actions against you.
Innocent Spouse Relief
You can file Form 8857 (Request for Innocent Spouse Relief) if you believe that your spouse alone should be responsible for all or part of the tax amount that’s due. You should file as soon as you are aware of the tax debt, which may happen when you receive a notice from the IRS.
Usually, you must file Form 8857 within two years of becoming aware of the tax debt. Even if you don’t have all the required documentation, it’s important to file this form as soon as you know you need to.
Know that the IRS legally must contact your spouse or former spouse to let them know that you applied for innocent spouse relief. This is true even if you are a victim of spousal abuse. You cannot participate in this process anonymously or without your spouse or ex-spouse’s knowledge. However, the IRS will not disclose your personal information to your spouse during the process.
Injured Spouse Relief
You should file Form 8379 Injured Spouse Allocation if you are an injured spouse on a joint tax return and need to get back a part of your refund that was seized to pay your spouse’s past-due obligation.
You may be eligible to apply if your spouse’s past-due federal taxes, state income taxes, state unemployment taxes, child support, or federal debts (e.g., student loans) are affecting your portion of a joint tax refund.
You cannot file both Form 8379 and Form 8857, which is the innocent spouse relief form. If you’re not sure which situation applies to you, contact a tax professional.
Collection Due Process Hearing
You may request a collection due process (CDP) hearing or an equivalent hearing if you want to appeal a collection action such as a:
- Federal tax lien filing
- Notice of intent to levy
- Notice of jeopardy levy
- Notice of levy on your state tax refund
- Post-levy collection due process
Use Form 12153 to request a collection due process or equivalent hearing. The notice you received from the IRS will have a deadline on it, and you must apply for a hearing by that deadline. Generally, you can apply for a CDP hearing within 30 days of receiving a notice and an equivalent hearing within 12 months. An equivalent hearing may be requested if you are past the deadline to file for a CDP hearing.
Collection Appeals Program
The Collection Appeals Program (CAP) lets you disagree with an IRS employee’s decision regarding your tax balance. You can appeal the following collection actions under CAP:
- A notice of federal tax lien
- A notice of levy
- A seizure of property
- A denial of request for property to be discharged from a lien
- A denial of lien subordination
- A denial of withdrawing an NFTL
- A denial of issuing a certificate of non-attachment
- A denial of return of levied property
- Third-party property claims
- Termination of an installment agreement
- Rejection of an installment agreement
By following the directions laid out in Publication 1660 Collection Appeal Rights, you can appeal directly to an IRS employee’s manager and potentially have a decision reversed. If the manager doesn’t agree with you, you have the chance to appeal to a higher authority as well.
Withdrawing a Tax Lien
You can use a Withdrawal of Notice of Federal Tax Lien (NFTL) to remove the public NFTL. To apply for a withdrawal, use the Form 12277 Application for Withdrawal of NFTL Form.
The IRS might grant your withdrawal if:
- You have fully paid your balance
- Withdrawing the NFTL will make it easier for the IRS to collect your taxes due
- Withdrawal is in the best interest of both you and the government
- In certain situations, if you have entered into an installment agreement
If the lien is withdrawn, you’re still responsible for paying the amount due.
Subordination of a Tax Lien
A certificate of subordination lets a creditor move ahead of the IRS when putting a lien on your property. A subordination of a federal tax lien is needed if you wish to refinance the mortgage attached to a property you own and a federal tax lien is already on the property. You can submit Form 14134 to apply for the subordination of a tax lien. You must submit the form at least 45 days before you need the certificate to be active.
Requesting Help from Taxpayer Advocate Service
Taxpayer Advocate is an IRS service that can help you navigate the IRS system in certain situations. If you know you need tax relief, but you don’t know how to go about getting it, Taxpayer Advocate can possibly help you. They can help if you’re experiencing financial problems due to tax burdens, if you’re facing immediate adverse action, or if you’re having trouble reaching the IRS to resolve a problem.
To request help from Taxpayer Advocate, simply complete Form 911 Request for Taxpayer Advocate Service Assistance (and Application for Taxpayer Assistance Order). You’ll need to describe the tax problem you’re having and the type of relief you’re hoping to get.
Choosing the Best Solution for Your Tax Situation
You don’t have to navigate tax relief alone. In fact, having an experienced tax professional like our attorneys at Wiggam Law on your side can work in your favor as they help you navigate the different forms and choose the right form of relief for your situation. Don’t wait to get your tax situation under control – contact us today to learn how we can help!