Tax Debt Relief
Debt, Tax Debt, Tax Debt Relief

Tax Debt Relief Program – Good or Bad

No one likes dealing with taxes unless they are getting a refund. However, that is not always the case, and the majority of the times, people end up owning more than they can afford. Once the debt starts piling up, it can be very daunting and stressful to keep up with it. In such scenarios, Tax-debt-relief companies come in handy and assure you a settlement with the IRS for much less of what you owe them. However, 7 out of 10 times such offers end up being a scam, and other times, it is just an expensive alternative of doing what you could do yourself for free. Nevertheless, you can easily avoid spending such amounts of money with the information and tips provided in this article. 

What Do You Need To Know About Tax Debt Relief, And How Is It Important?

Tax Debt Relief

In a situation, where you are running behind on timely tax payments, you might qualify for some method of tax debt relief. Typically, the relief comes in the form of a debt settlement with the IRS or a payment plan that might help you pay them back sooner. 

Either way, if you think you might need such services, you should start monitoring your actions immediately. On failure to pay, the IRS usually charges a penalty of 0.5% of the unpaid taxes that month or for the part of a month. In addition to that, interest is charged, which starts adding from the day your taxes are due (Tax Day, April 15th of every year) and continues until the payment is cleared. 

For example, if you owe the IRS&1,000 and are six months late in clearing the payment, a penalty of $30 will be added to the amount, along with the amount of interest that ensued. Although this does not sound like a lot of money, delays should not be neglected at all. Accumulation of delay penalties and interest for more extended periods of time can increase this number by quite a margin.

Not only that, but the IRS can also levy a legal claim on your property, more commonly known as a ‘lien on the property.’ This basically means that the IRS is entitled to all the money earned from selling your house. Either this or they may put a tax levy on the property, which in simpler words mean that they are allowed to sell your property to recover the pending taxes you owe to the government. However, the affected property might not only include your house, but also any other personal property or financial assets that the IRS thinks might get them the money back.

Why Should You Be Cautious of Tax Debt Relief Companies?

There have been several advertisements on the television and radio about how tax debt relief companies can help troubled taxpayers by lessening or even removing their tax debts totally. Well, technically, there is a way to settle the tax payable, for a lesser amount than what it originally is, and it is by an IRS Offer in Compromise (OIC). 

In spite of charging thousands of non-refundable dollars, these tax debt relief companies might not always come through. It is a tough job to be eligible for an offer in compromise, and there are strict criterions one has to fulfill to qualify. For instance, you should not be in the middle of a bankruptcy and must be updated with all payment and filing requirements. These are only two of the several criteria you will find later in the article. 

Tax Debt Relief

That being said, these tax debt relief companies are often considered to be a scam. What they do is take your money and neglect, sending the IRS the required paperwork to apply for a different payment plan or OIC. 

Over the past few years, the Federal Trade Commission has received many complaints of tax debt reliefcompanies that have made unauthorized charges, in addition to the upfront fees. Some of these companies also offer facilities of an advocate, who is supposed to get you on a better payment plan from the IRS. However, in such a situation, you are more likely to overpay the company for something that you could do on your own, juts by contacting the state or IRS directly.  

Signs That Tell You Tax Debt Relief Are a Scam

A significant debt to the IRS can make people very desperate, and this is exactly what scammers and the tax relief companies capitalize on. While there may be a few legitimate tax relief companies, most companies are just scammers trying to get your money. The Federal Trade Commission has confirmed that no tax debt reliefcompany will ask for payment before the work is done, and if they do, it’s a scam. Along with that, there are a few other ways by which you can tell if you are getting scammed:

  • If the company guarantees that your debt will be forgiven 
  • If they promise to get you a drastic reduction or even eliminate the debt altogether
  • And If the company handles your business through emails or letters
  • Uses tactics to delay your case, for example asking for the same documents again and again
  • Informs you that you no longer qualify for debt relief or the IRS has rejected your application after you have already paid and waited a long time. 

What Are Some Options of IRS Tax Debt Relief Payments?

It is always a wiser decision to take prompt actions when you are struggling with the amount of taxes you owe to the government. Usually, when someone gets a notice from the government, they often get distressed and try to ignore the problem. On the contrary, only if they talk to a government worker, they can get all the help they require to fix the problem. If you are having troubles paying your taxes on time, contacting the IRSdirectly should be your first step. The IRs has several options that can help you in case of federal taxes.

What Are Some Payment Plans Offered by the IRS?

People can sometimes have problems paying their taxes in full, which is when you the IRS can set up a short-term or long-term payment plan for you. However, irrespective of any payment plan the IRS decides on, there is going to be added penalties and interest on the amount unpaid until the full payment is made; nevertheless, it is going to be much less than regular. An added benefit is that as long as you have payable assets, you do not require a steady income to be eligible for such plans. 

With the short-term plan, you get 120-day tenure to pay your tax debts. You can use money order, a debit or credit card a check or even a checking account to make automatic payments to the IRS. However, if you need more than 120 days to make the full payment, you can opt for the long-term plan, which further has a couple of options within it. While the first requires you to make automatic payments through a checking account, with the second method, you can make the payment manually via any electronic payment method, money order, or a check. Given below are the costs of setting up a long0term plan:

  • Automatic plan: $31 for online applications and $107 for phone applications
  • Manual plan: $149 for online applications and $225 for phone applications

As per the federal property guidelines, both plans require $43 to be set-up for low-income applicants. However, if you choose to apply for an automatic plan through online mediums, it charges $31 irrespective of your income level. On top of that, the qualifications required for your eligibility are not as strict as they are for an OIC. 

Offer in Compromise

Tax Debt Relief

In a situation where your debt is too high for you to pay it in full or to do so might create a financial crisis, the IRS provides you a way out. With an offer in compromise, the IRS will let you settle for a lesser amount than what you owe. You can easily check to see if you are eligible for such a program by using the Offer in Compromise pre-qualifier. However, the IRS usually checks your eligibility on the following criteria:

  • Income 
  • If you are able enough to pay
  • Expenses
  • Value of assets (with the debts or liabilities subtracted)

That being said, the IRS always advises you to try all available payment options before you opt to apply for an Offer in Compromise. 


After reading this article, you should know better than to go seek help from scamming tax debt relief companies. Even with a legit company, you are sure to end up paying more than you need to. Such a significant expense can be avoided if you just contact the IRS directly. 

You can contact the IRS in person as well. Just make an appointment with your local IRS office, and they will surely help you. However, if you are having problems with paying your taxes, the sooner you work on a solution, the lesser you have to pay in interest and penalties!

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