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Owe the IRS | Can't Pay | IRS Fresh Start Program | Flat Fee Tax Service

Updated: Jul 2, 2019

Owe the IRS a Tax Debt - Can't Pay? IRS Fresh Start Initiative You may have many questions regarding your tax debt which could include: "I owe the IRS and can't pay". The moment that you find out you owe more to the IRS than expected can leave you feeling defeated. Not getting a tax refund is bad enough, but finding out you owe a lot of money is even worse. "Owing a lot of money" to IRS is very subjective. What is "a lot" to some, is not "a lot" to another".

Fortunately, you can resolve that tax bomb by following these steps. 1. How Much Do I Owe The IRS? - Great Question.

Take a look at your completed tax return (#unfiledtaxreturns) very carefully, and look to see if you actually owe the government money. It’s easy to add the same income twice or to forget an important deduction.

If your tax return doesn’t show a deduction or credit you thought you qualified for, make sure you answered all the questions correctly.

One missed question or checkbox can cause you to miss out on tax benefits you may be entitled to. Another way to determine if something is amiss is to compare this year’s return to your tax return from last year. If your tax situation has not changed drastically, but your tax bill has, that’s a red flag to find out why.

If you owe money because you received a letter from the IRS, don’t automatically assume the IRS is correct. The IRS make mistakes, too.

2. Minimize Your IRS Penalties and Interest

Wouldn't it be great if there was a book titled "IRS Penalty Abatement for Dummies". Sorry to say, there isn't. The IRS will pile on penalties and interest on top of the original amount owed. Luckily, you can minimize these extra charges by writing a "reasonable cause" letter to the IRS. What you consider to be "reasonable" and what the IRS considers "reasonable".

a. Exceptions to underpayment of tax penalties

If you underpaid your taxes this year but owed considerably less last year, you typically don’t pay a penalty for underpayment of tax if you withheld at least as much as you owed last year. That, of course, is only true if you pay by the due date this year.

The IRS Tax Attorneys at Flat Fee Tax Service, Inc.  can help determine if the safe harbor rule reduces your penalties and interest. Our IRS tax relief firm has very affordable fees to do the work necessary to have your IRS penalties abated.

b. Ask for an abatement of penalties

The IRS will reduce or remove penalties and interest on the penalties if a taxpayer writes a letter explaining the situation. Your letter must cite a "reasonable cause" for your tax problem. You only get one shot at a penalty abatement so your "reasonable cause" letter better be very good.

For example, if you had an unusual tax event, you made an honest mistake, or you or your spouse had a serious illness, the IRS may waive the penalties.

Be sure to ask for an “abatement” in your letter.

3. Pay Your Tax Debt as Quickly as Possible If you owe a tax debt that may be subject to penalties and interest, don’t wait until the filing deadline to file your tax return.

Go ahead and send an estimated tax payment or file early and pay as much tax as you can as quick;y as you can.

Even if you choose to file an extension, any taxes owed are still due on the filing deadline. Therefore if you don’t pay by April 15, you are subject to those extra IRS penalties and interest. 3. What If I Can’t Pay My Tax Debt?

Here we are, back to your original question. If you can’t pay your tax bill by the time it is due, you can file Form 9465, Installment Agreement Request, to set up installment payments with the IRS. In some cases, you can go online and set up an Installment Agreement while on the IRS website.

The IRS must allow you to make payments on your overdue taxes if:

a. you owe $25,000 or less, or you prove you can’t pay the amount you owe now, or b. you can pay off the tax in three years or less.

Additionally, you must agree to comply with the tax laws and not have had an installment agreement with the IRS in the past five years.

4. Offer in Compromise

Now we are "talking". The Offer in Compromise program is the ultimate, optimum tax relief program. If you are an insomniac or watch a lot of cable news, you’ve probably heard ads from a tax relief firm promising to help you settle your IRS bill for less than you owe. It’s true that the IRS will negotiate back taxes through an Offer in Compromise (OIC).


The IRS has what is called the "Fresh Start Initiative" (#OfferinCompromise) which is a part of the Offer in Compromise program. Not everyone is qualified or eligible. But, if you really can't pay your every day expenses and you tax debt at the same time, you are most likely a great candidate to settle your tax debt. Here are some numbers to consider: 96% of Flat Fee Tax Service, Inc. Clients Have Received an IRS Settlement. Per 2016 IRS Statistics, the IRS Approved Approx. 42% of the 80,000 or so Offer in Compromise Submissions. An Individual Taxpayer Has Approx. a 30% Chance of Success if They do Their Own Offer in Compromise.

There is no "downside" to doing an Offer in Compromise if you are "qualified and eligible". The Offer in Compromise process takes approximately 10 to 12 months to complete. Many of our clients who "can't pay the IRS" have settled their IRS tax debt have paid the IRS between $100 to $500 to settle their tax debt. It doesn't matter how much your tax debt is, it's "how much can you pay".

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