Every time you don't pay the tax balance that appears on your federal income tax return in full before the due date, you create a tax debt. Tax relief refers to your options for resolving a debt you have with the government. In addition to IRS payment options, there are for-profit companies that advertise solutions to pay tax debts, but be careful. While there are many options for resolving tax debt, it's critical that you try to do so voluntarily.
If you owe back taxes, are struggling financially, and would have trouble paying essential living expenses if you were to cancel your tax debt, the IRS may consider the debt to be “currently uncollectible.” Late tax bills carry severe penalties and interest, and the IRS can impose taxes on property, seize funds from your bank account, or even garnish your paycheck. Taxpayers who can show that it's not possible to pay all of their debt, either now or over time, may qualify for an OIC. A commitment offer (OIC) is an agreement to settle your tax bill for an amount less than the total amount due. If you don't settle your tax debt and don't pay the IRS what you owe, the IRS may file a federal tax lien notice to protect your interests.
The IRS has many options to help you pay your tax debt, including reducing the debt by filing or correcting a tax return already filed. Others can be exempted from fines if they have a good reason not to file or pay their taxes. But if you're self-employed, own a small business, or simply have an employer who ruins your withholding, then you'll owe money when it's time to pay taxes. You may be an innocent spouse if your spouse, or former spouse, made a mistake on your joint return that makes your tax liability underestimated.
A tax lien can affect your ability to get credit, including buying a house or car, or even obtaining a credit card. To show that you meet the filing rules, you must have filed or filed an extension for all of your tax returns; you cannot have a pending request from the IRS for a return you didn't file. To that end, the IRS does allow certain taxpayers to negotiate their debts to mutually benefit the collection goals of the IRS and the taxpayer's reasonable ability to pay. The IRS stands in solidarity with spouses or former spouses who, for reasons beyond their control, are struggling to pay taxes.