Tax Relief Programs: Every IRS Option Explained

Program overview

The IRS provides several official programs for taxpayers who cannot pay their full tax balance. Each program has different eligibility criteria and outcomes. The right choice depends on how much you owe, what you can afford, and your overall financial situation.

Installment agreements (payment plans)

An installment agreement is a payment plan that lets you pay your tax debt in monthly installments. This is the most commonly used IRS resolution option.

Types of installment agreements

• Short-term plan (180 days or less): Available for balances under $100,000. No setup fee. Pay the full balance within 180 days.
• Streamlined installment agreement: Available for balances of $50,000 or less. Minimal financial documentation required. Pay over up to 72 months.
• Non-streamlined installment agreement: For balances over $50,000. Requires detailed financial disclosure (Form 433-A or 433-F). Payment amount based on IRS analysis of your income and expenses.

Setup fees

Interest and penalties continue to accrue on the unpaid balance until paid in full.

Read our detailed installment agreement guide →

Offer in Compromise (OIC)

An OIC lets you settle your tax debt for less than the full amount owed. The IRS considers your income, expenses, asset equity, and ability to pay.

• Application fee: $205 (waived for low-income applicants).
• Lump-sum option: Pay 20% upfront; remainder in five or fewer payments after acceptance.
• Periodic payment option: Initial payment plus monthly installments during IRS review.
• Review time: Typically 6 to 12+ months. Automatically accepted if IRS does not decide within 2 years.
• Post-acceptance: Must remain in full compliance (filing and payment) for 5 years.

The IRS accepted approximately 21% of OIC submissions in 2024. The 10-year average (2015 to 2024) is about 37%. Acceptance depends heavily on the quality of documentation and whether the offer amount aligns with the IRS calculation of your reasonable collection potential.

Read our detailed OIC guide →

Currently Not Collectible (CNC)

If paying your tax debt would create a financial hardship, meaning you cannot cover basic living expenses, the IRS may place your account in Currently Not Collectible status.

• Collection activity (levies, garnishments) stops while CNC is in effect.
• Interest and penalties continue to accrue.
• The IRS periodically reviews your financial situation (typically annually).
• If your income improves, the IRS may resume collection.
• The 10-year Collection Statute Expiration Date (CSED) continues to run, potentially expiring the debt.

CNC is not a permanent solution but provides immediate relief from active collection when you have no ability to pay.

Read our detailed CNC guide →

Penalty relief

IRS penalties can add significantly to your tax balance. Several forms of relief exist:

• First Time Abatement (FTA): Available if you have a clean compliance history for the prior three tax years (no penalties for the same type of violation). Applies to failure-to-file and failure-to-pay penalties.
• Reasonable cause: Available when circumstances beyond your control prevented timely compliance (serious illness, natural disaster, reliance on incorrect professional advice). Requires documentation.
• Statutory relief: Available in limited situations under specific IRS initiatives or published guidance.

Penalty relief does not remove interest, but reducing the penalty amount also reduces the interest that accrued on that penalty.

Read our detailed penalty relief guide →

Innocent spouse relief

If you filed a joint return and your spouse (or former spouse) improperly reported items or omitted income, you may be relieved of responsibility for the tax, interest, and penalties on those items.

• Innocent spouse relief (IRC § 6015(b)): You did not know, and had no reason to know, about the understatement of tax.
• Separation of liability (IRC § 6015(c)): Available to divorced, separated, or widowed taxpayers. Allocates the tax liability between spouses.
• Equitable relief (IRC § 6015(f)): A catch-all provision when you do not qualify for the other two types but it would be unfair to hold you liable.

Request innocent spouse relief by filing Form 8857. There is no fee to apply. The IRS will notify both spouses and consider factors including knowledge of the error, economic hardship, and whether you benefited from the understatement.

Lien withdrawal and discharge

A federal tax lien is a legal claim against your property. A Notice of Federal Tax Lien is filed publicly and can affect your credit score and ability to sell property. For how many liens the IRS actually files each year, see our IRS collections statistics.

Lien withdrawal

You may request withdrawal of the Notice of Federal Tax Lien (using Form 12277) if:

• You have entered a Direct Debit Installment Agreement and owe $25,000 or less.
• You have made at least three consecutive direct debit payments.
• Your agreement will pay the balance in full within 60 months or before the CSED.
• You are in full compliance with all filing and payment requirements.

Lien discharge

A lien discharge removes the lien from a specific piece of property (e.g., to allow a sale) without eliminating the lien entirely. This is handled through an application to the IRS Advisory Group.

How to choose the right program

Start by answering these questions:

1. Are all your returns filed? If not, file them first. No resolution program is available until you are in compliance.
2. Can you pay the full balance within 180 days? If yes, a short-term payment plan is simplest (no setup fee).
3. Can you afford monthly payments? If yes, a streamlined installment agreement (up to 72 months) may be the best fit.
4. Can you not pay the full balance based on income and assets? Use the IRS OIC Pre-Qualifier tool to check whether an Offer in Compromise might be viable.
5. Can you not pay anything without causing hardship? Currently Not Collectible status may be appropriate.
6. Do you have penalties from a first-time issue? Request First Time Abatement to reduce your balance, then apply for the appropriate payment program.

Multiple programs can work together. For example, you might request penalty abatement to reduce your balance, then enter a streamlined installment agreement, and later apply for lien withdrawal once you have a DDIA with three consecutive payments.

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