However, you can take hope in knowing that several defenses are available to you when it comes to working with the IRS to resolve your tax debt. These strategies can help you pay off what you owe quickly and resolve your tax debt issue permanently.

Consider an Offer to Compromise

If you are certain that you cannot pay off your tax obligation in a timely manner and lack the money and the assets to satisfy the debt in whole, you may consider making an Offer in Compromise, or OIC. An OIC allows you to pay a lesser amount while settling your account with the IRS permanently.

Before you make an OIC, you first must complete the IRS form 433-A. This form requires that you divulge how much money you make right now, how much money you will make in the foreseeable future, and how much your assets, if you have any, are valued at currently.

Along with completing this form, you also must:

• File all past due and current tax returns
• Make all estimated tax payments for the current year
• Pay all required current federal tax deposits if you are a business owner with employees

You also cannot have an open bankruptcy if you wish to make an OIC. After you meet these obligations, you must then complete IRS form 656 and pay the required $150 non-refundable fee. The IRS will then consider your OIC, although in truth it is well-known for rejecting most OICs submitted to it.

 

Participate in Collection Appeals Program

Another defense available to you is the Collection Appeals Program, or CAP. You can make use of the CAP option:

• Before or after the IRS files an intent to levy against you
• Before or after the IRS levies or seizes property
• Upon the termination or proposed termination of your installment agreement
• After the rejection of your installment agreement
• Upon the modification or proposed modification of your installment agreement

When you make use of the CAP option, you can anticipate receiving a faster decision regarding your tax debt issue. However, you have no leeway to challenge the CAP decision once it is rendered. Even so, people often choose to make use of the CAP defense if they are low income because they are entitled to legal help from a low-income taxpayer clinic.

 

Set Up an Installment Payment Arrangement

If you agree with the amount that you owe the IRS and believe that you would not benefit by making an OIC, you always have the option of setting up a payment arrangement. When you set up such an arrangement, the amount that you must pay each month will be reflective of how much money you earn and how much you owe the government.

You will be required to make payments on the debt on the same day each month, just as with any other form of installment debt. You can always renegotiate if you experience a change in income or experience financial hardship. A payment arrangement will not stop the IRS from seizing your tax returns each year until the debt is paid in full.

As galling as it may seem to many people, you do have the option of approaching the IRS by yourself and using one of these defense options to settle your debt. These options can help you close your account with the IRS in a timely manner while allowing you to escape the worst financial repercussions that comes with owing the government a tax debt.