Every tax season spawns widespread terror among taxpayers who find themselves in substantial debt to the Internal Revenue Service. Endemic fears of ever-increasing penalties and interest add fuel to the fires of fear. Many Americans envision slow, painful economic deaths followed by eternal financial entombment in IRS tax sepulchers. Fortunately, effective tax debt relief strategies exist to excavate you from the IRS pit of tax delinquency.

Notions that the IRS always wants their full due are indeed accurate. Moreover, this powerful government agency has a vast array of collection means. Full wage garnishments, real estate liens, and outright seizure of personal or real property are a few items in its repertoire of revenue recovery.

Every taxpayer must first decide whether or not to attempt settlement negotiations. This approach to tax debt relief is especially appropriate for beleaguered business owners who and are hit with huge tax bills. All too often, there are insufficient liquid resources to immediately satisfy IRS demands. Full payment would require complete liquidation of the business.

Unfortunately, this would cause the entrepreneur’s total destitution. Ultimately, the long-term cost to all taxpayers is much higher than the outstanding debt of a single delinquent taxpayer. Recognizing this reality, the IRS offers two primary options for negotiated settlement of delinquent taxes.

Offer in Compromise (“OIC”)

An OIC entails the execution of a written contract between the IRS and a delinquent taxpayer. OIC terms provide for payment of a specific percentage of the total outstanding tax obligation.

In order to qualify for an OIC, you must demonstrate special circumstances that preclude full payment of your outstanding tax debt. Such circumstances are usually either: 1) sufficient doubt about collectability of the full debt; or, 2) serious questions over your true level of tax liability. If either or both conditions exist, you still must prove to IRS satisfaction that full payment would create an undue economic hardship or unfair burden.

Partial Payment Installment Agreement

If the IRS rejects your OIC proposal, an alternative tax debt relief strategy may be available. In a Partial Payment Installment Agreement, you make fixed monthly payments until your entire balance is expired. Short-term installment agreements require two years or less to complete. Long-term installment plans are also available with considerably longer repayment terms and lower monthly obligations. Such longer-term payment arrangements carry significantly higher interest costs, however.

Before embarking upon any repayment plan, seek expert counsel from a tax debt relief professional. Whether you choose to proceed with or without assistance, understanding the rules of the game are your first step toward assuring ultimate victory on a level playing field.