IRS Debt Forgiveness: Explanation and Programs

IRS Debt Forgiveness

If you owe the IRS tens of thousands of dollars in back taxes, you’re likely to be eligible for some sort of tax forgiveness program. But, the good news about is that the worse your financial outlook is, the more tax forgiveness you’ll be offered.

If you ever face such a predicament with the IRS, you need not fret. This article will explain to you what IRS debt forgiveness is. Also, we’ll provide you with information on various IRS debt relief programs.

What is IRS Debt Forgiveness?

IRS debt forgiveness is the IRS’s way of helping those who cannot afford to pay their back taxes in full. The IRS wants the money you owe, but it will not take your money if it leaves you destitute. Generally, the greater the financial duress, the more likely you will be able to get IRS debt forgiveness.


The impact of tax cancellation or IRS debt forgiveness depends on your individual circumstances. Usually, you borrow money from a commercial lender. If the lender later cancels or forgives the debt, they’ll have to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt.

Why would the IRS allow you to receive forgiveness for money that you owe them?

There are many reasons for the IRS to forgive your debt. It’s illegal for the IRS to collect money from someone who literally cannot afford to pay it. The rule regarding IRS debt collection practices is that they are not allowed to enforce any collection action which would lead you, into a financial disaster or crisis. The IRS’s only hope to successfully collect any money from someone in a bad financial situation is to write off some of their debt.

How does the IRS debt relief program work?

It doesn’t matter which actual program you end up choosing to pursue. You will have to prove to the IRS that you literally cannot pay back whatever you owe them. The crux of the entire approvals process is to convince them that collecting the money they want from you would ruin your life. That it could cause you to lose a home or business, default on loans, etc.

The worst the financial repercussions appear to be, the easier it’ll be for you to get the IRS to accept some kind of write-down or write-off. This will help you get yourself approved to receive tax debt forgiveness from the IRS.

IRS Debt Forgiveness Programs-

There are various ways to receive some form of IRS tax forgiveness. Depending on your unique financial situation, you’ll need to choose which of the programs below work for you.

Some people who owe the IRS back taxes hire an expert to help them negotiate an IRS Tax Debt Settlement. This is something that we can help you with. At Accounts Confidant, our experts have years of experience when it comes to dealing with debt settlement and relief. So, give us a call to book a consultation, we provide our clients with a 30-day free trial.

The following are some of the various IRS debt relief programs:

The Offer in Compromise Plan

The most popular form of tax forgiveness program hinges on the IRS’s Offer in Compromise system. It enables you to pay a percentage of the outstanding tax debt owed, depending on your financial situation. The way that the Offer in Compromise system works is that you essentially tell the IRS that you aren’t able to pay off the total amount of money they want.

Instead, you offer to pay a percentage of that total amount, based on your financial limitations. You will have to get the IRS to agree to your Offer in Compromise. Then you’ll be rewarded by paying back only a portion of whatever you owe them. Moreover, you’ll be able to pay it back either with a single, large and lump sum payment.

Alternatively, you can remunerate via a payment plan that lets you chop the repayments up into a series of smaller, incremental payments. The Offer in Compromise system helps the IRS as well. It lets them take a portion of the debt that they may have never been able to get. This is especially great for you since someone who owes way more than they can possibly pay could simply decide to file for Bankruptcy. Doing so can help you avoid paying the IRS anything (with court approval).

The Partial Payment Installment Agreement Plan

The IRS installment agreement plan is similar to the outcome of an Offer in Compromise approval. It enables you to stretch out your IRS back tax payments. Therefore, you can now make smaller, incremental payments, instead of having to pay everything all at once.

Installment agreements are negotiated directly with the IRS, either by yourself (the taxpayer) or via a 3rd party company operating on your behalf (debt resolution experts, etc.). There’s no guarantee that you’ll get approved for an installment agreement plan. However, if you have problems with raising the money to pay back your IRS tax debt, then it’s definitely worth looking into.

Via the Installment Agreement Plan, some people have managed to significantly write down their debt. Alternatively, others haven’t been able to reduce their total debt by much. But, they have been able to stretch the payments out over such a long period of time that it takes a lot of the bite out of the IRS’s collection activities.

Bankruptcy Discharges

Just like you’re able to file for Bankruptcy and have Mortgage Debt, Credit Card Debt, Medical Debt, or Student Loan Debt Discharged, anyone with an extreme amount of tax debt may pursue the same opportunity.

Both Chapter 7 and Chapter 13 Bankruptcies allow Americans to discharge their income tax debts. Still, there are specific requirements that determine who is eligible to receive a tax debt discharge. This could be via bankruptcy, so don’t think that simply choosing to file means getting the forgiveness benefit.

Generally, Chapter 7 bankruptcy gives you better odds at beating all of your IRS debt. It allows for a complete and total discharge of all debts owes. But, chapter 13 bankruptcy is a little easier to qualify for. However, it only allows you to discharge some of your debt. Additionally, it forces you to set up a payment plan for the remaining amount that the IRS refuses to give up on.

Preventing IRS Bank Account Levies

Just like the IRS is able to take money from your paycheck, they’re also able to literally extract it from your bank account. It doesn’t matter if you’ve got a Checking Account or Savings Account. The IRS can track it down and get in touch with the people who run it. They’re absolutely able to extract whatever funds they’ve determined you owe them.

It’s not easy to stop an IRS tax levy on a bank account. But, it’s definitely worth attempting if you’re having your funds withdrawn. The way to prevent the IRS from completing a planned bank levy is similar to how the other IRS debt forgiveness programs explained above function. You’ve got to convince them that the withdrawal of your money could end up significantly impacting your quality of life.

Statute of Limitations Expiration

Most people aren’t aware that the IRS doesn’t get an unlimited amount of time to collect back taxes. The IRS only has 10 years to collect taxes, fees, penalties and interest from taxpayers. Usually, the 10 year collection period begins on the date your taxes were initially filed.

Whether you owe taxes from a year ago, or five years ago, it may be worth consulting with a tax resolution company like Accounts Confidant to find out about strategies for delaying, obstructing and putting off the IRS collections process. There are definitely ways to prevent the IRS from being able to begin enforcement actions. Furthermore, if you can delay them long enough (10 years), then you’ll have 100% of your back tax debt forgiven.

The IRS Fresh Start Initiative

The IRS’s Fresh Start Initiative was recently expanded to allow more taxpayers access to financial assistance benefits. Before they relaxed the regulations, the IRS’s Fresh Start Initiative required a complicated, future earnings analysis in order to determine how much each taxpayer was capable of paying back, and thus, how much of their outstanding debt the IRS should write off.

Under the old regulations, applying for a five-month repayment plan would require an analysis of 4 years of future income, but the new regulation only requires an analysis of a single year of future income. Furthermore, under the old regulations, applying for a 6 month to 2-year repayment plan would have required an analysis of 5 years of future income, whereas the new system only requires an analysis of 2 years of future income.

Obviously, this significant reduction in the analysis of future income requirements has made the Fresh Start Initiative application significantly less difficult to complete, significantly reducing complexity, time, and annoyance of pursuing the IRS debt forgiveness benefit. However, the Fresh Start Initiative isn’t the only path to Federal tax forgiveness benefits, as there are plenty of other avenues to receive financial relief.

In conclusion

We hope that the aforementioned information and programs help you with your IRS debt relief predicaments. As mentioned earlier, if you require or are seeking assistance and guidance regarding this issue, you can always get in touch with our experts at Accounts Confidant. We make sure that your fiscal issues are dealt with in the most proper manner and delivered before the deadline.

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