The Internal Revenue Service lets taxpayers apply for reduced tax bills through its Fresh Start program, according to the Federal Trade Commission. Taxpayers also can apply for interest and penalty abatement on overdue tax bills, although few individuals qualify for these benefits.Continue Reading
Taxpayers who are unable to pay their taxes can apply for an offer in compromise, which settles the tax bill for a lesser amount. When a taxpayer applies for this type of settlement, the IRS analyzes the individual���s assets and income, and the agency only approves the offer if it appears that the taxpayer can���t pay the full tax bill through an installment agreement or a lump sum. The agency generally accepts an offer if it appears that the settlement is the most a taxpayer can pay within a reasonable time period, notes the IRS.
Some taxpayers qualify for penalty abatement, which wipes out penalties that the IRS adds over time to past-due bills, explains the FTC. Taxpayers must demonstrate special hardships when they apply, and the IRS limits approvals. In limited cases, the IRS also offers interest abatement on past-due bills. When the IRS awards interest or penalty abatement, it still requires taxpayers to pay the rest of the tax bill.
Taxpayers who just need more time to pay their bills can apply for installment plans. The IRS lets taxpayers use installment agreements to pay up to $50,000 in back taxes over six years. Taxpayers may qualify for installment agreements if they owe more than $50,000, but they must provide a complete financial statement when they apply, notes the IRS.Learn more about Taxes