What do you actually need to know in order to settle your client’s IRS tax debt? Often, practitioners think they need to know everything there is to know about a subject before they feel comfortable resolving their client’s IRS tax debt.  Perhaps you’ve been in what I call, the “paralysis of analysis”.

You want to know what I tell those practitioners? Start with learning the five most common ways to resolve your client’s tax debt. It’s not nearly as complicated as you think it is. If you could do a 1040, you can do an offer in compromise.  Here are the five ways to settle your client’s IRS tax debt.

First, is an Offer in Compromise. An Offer in Compromise (OIC) is a legal binding written agreement between the taxpayer and the IRS that settles your taxpayer's debt in full for less than the amount owed.  Many times, for a fraction of what's owed. It's done via form 433A(OIC) and Form 656.

Second, is an Installment Agreement. An Installment Agreement (IA) is an agreement between the taxpayer and the IRS that fully pays your client's tax liability over time, generally over 72 months.  It's very similar to a commercial installment loan repayment plan.

The third way is a Partial Pay Installment Agreement (PPIA), which I like to refer to as the new Offer in Compromise or the Backdoor Offer in Compromise. A Partial Pay Installment Agreement is an agreement between the taxpayer and the IRS that partially pays back the IRS, generally over the remaining life of the collection statute expiration date or CSED.

Now, what's interesting about a Partial Pay Installment Agreement is that in most cases, the IRS is not concerned with looking towards the net equity in assets to determine what the monthly payment amount is, especially if the case is with ACS. And it could be a lot more beneficial to your client than an offer in compromise because the IRS is only interested in collecting the monthly disposable income over the remaining life of the ten-year collection statute expiration date.

Fourth is Currently Non-Collectible (CNC). Now, this could be a temporary Band-Aid, unless you have elderly clients on a fixed income. Then, it's a very good permanent way to settle their tax debt. However, I also used the CNC option as a steppingstone to an Offer In Compromise or a Partial Pay Installment Agreement.

And then the last way to help settle your client's IRS tax debt is a Penalty Abatement Request. You can either do a first-time penalty abatement verbally over the phone with ACS, or you can do a written formal penalty abatement request based on reasonable cause and ordinary business care and prudence.

Those, my friends, are the five most common ways to settle your client's IRS tax debt. Tax resolution is a lucrative specialty in the tax industry. By following this blog and our social media posts you can continue to grow your knowledge so you can best serve your clients who need resolution services while expanding your business into a “white-hot” niche in the tax space.