Taxes

Are you considering applying to an IRS tax forgiveness program? Here’s what you need to know first

If you’ve found that you owe more money to the IRS than you can pay, there are options. Here’s what you need to know about the tax forgiveness programs.

Jennifer Bubel

Sports journalist who grew up in Dallas, TX. Lover of all things sports, she got her degree from Texas Tech University (Wreck ‘em Tech!) in 2011. Joined Diario AS USA in 2021 and now covers mostly American sports (primarily NFL, NBA, and MLB) as well as soccer from around the world.

Update: Mar 28th, 2025 05:56 EDT

If you’ve found that you owe more in taxes than you can actually afford to pay, the IRS does offer tax forgiveness programs. However, applying and qualifying for those programs isn’t easy. So it’s important to know the criteria you need to meet as well as the terms and potential alternatives.

IRS tax forgiveness programs

Offer in Compromise

The IRS’ most well-known tax forgiveness program is called the Offer in Compromise (OIC). The OIC allows taxpayers to settle their debt for less than what they owe, but requires meeting strict criteria, including financial hardship and the ability to pay. The IRS will reject any application that does not meet its criteria.

If you do not meet the criteria for the OIC, other options include installment agreements, penalty abatement, and Currently Not Collectible (CNC) status, which help taxpayers reduce or manage their tax debt.

1) The IRS offers a variety of payment options and taxes forgiveness programs for people who can't pay their tax bill in full by the due date.

2) Instalment payment plans that allow you to pay off your debt over time with regular monthly payments.#simpletax #taxtips pic.twitter.com/TKzBD23Yxu
— Simple Tax (@SimpleTax_95) January 20, 2023

Payment plans

Taxpayers struggling to pay what they owe can opt to pay in structured monthly installments rather than one lump sum. It’s important to understand interest, penalties, qualification for short-term or long-term plans, and whether or not it will be required to set up automatic withdrawals.

Currently Not Collectible Status

CNC status will apply to those who cannot afford their payments at all. It will provide temporarily relief from the collection of IRS payments, but will not forgive the debt. Rather, it defers it until your financial situation improves.

Penalty Abatement

The IRS may forgive penalties in certain cases, such as first-time offenses or emergencies (like medical issues or natural disasters). Taxpayers should ask about eligibility and required documentation.

Tax Relief Specialist

Working with a tax relief specialist can help navigate the complex forgiveness process, but it’s important to verify their credentials and fee structure to determine whether or not the cost is worth it for you.

Understanding the rules and asking the right questions is essential for navigating IRS tax forgiveness programs effectively.