It can be unfortunately easy to end up behind on your taxes to the Internal Revenue Service (IRS), leading to penalties and accrued interest. Many taxpayers looking to resolve a debt they can’t repay want to know, “How long does it take to settle a tax debt with the IRS?”
The time it takes to settle an IRS tax debt relies on many factors, primarily the method of settlement you apply for. It also depends on your financial circumstances and whether you work with an attorney.
Understanding Debt Settlement With the IRS
The IRS is willing to work with taxpayers who can’t repay their debt. In FY 2024, the agency had over 2 million contacts with its Taxpayer Assistance Center offices throughout the United States.
In fiscal year (FY) 2024, the IRS collected $5.1 trillion in gross taxes. You are not the only person dealing with a tax liability. Many taxpayers entered into debt settlements with the IRS for debt they couldn’t repay, including 33,951 offers in compromise made by taxpayers and 3.4 million new installment agreements established in FY 2024. These are two of the methods you might be able to use to resolve and settle your tax debt.
Short-Term Payment Plans
A short-term payment plan allows you up to 180 additional days to pay your debt. These can be set up very quickly for individual taxpayers by filing an Online Payment Agreement application. Business taxpayers must call the IRS to begin a short-term payment plan. If you qualify, approval is often very fast.
Installment Agreements
Also called long-term payment plans, these allow you to pay your debt off monthly, giving you more time to pay the debt in full. These may require more information provided to the IRS to create, so they may take slightly longer to be approved.
Currently not Collectible Status
This is a temporary delay in the collection of your debt. The IRS may require financial information before approving the request. Securing a Currently Not Collectible status does not forgive your debt, but means you will have to pay the full amount when your financial situation improves. This can help you quickly pause collection actions like levies or liens.
Offer in Compromise
An offer in compromise is the method of debt settlement that is likely to take the longest to resolve. It can take up to two years, because if the IRS hasn’t made a decision by two years, the offer is automatically accepted. The appeals process is not part of this two-year deadline, so a case with an appeal can take over two years.
Securing an offer in compromise is difficult, and it takes a lot of financial documentation to prove you qualify to apply. It also takes a lot of negotiation with the IRS.
Disputes in the Debt Settlement Process
The debt settlement process can take longer when there are disagreements, errors, and disputes between you and the IRS. You may fail to provide the necessary information to the agency, or the agency might deny a method of debt settlement. You may need to provide additional information or appeal an incorrect decision.
Working With a Debt Settlement Attorney
When you hire a tax Jacksonville state taxes lawyer, it is easier to navigate the debt settlement process and understand how long it will likely take. An experienced attorney has handled these types of cases before and can estimate how long your case might take to resolve based on your unique circumstances. They can assess your situation to determine what the ideal method of resolution is for your IRS tax debt.
While an attorney cannot guarantee a faster outcome, they can help you avoid missteps and errors that might otherwise lengthen the process. They also negotiate with the IRS on your behalf, leveraging their years of tax law and negotiation experience to your benefit. This can improve negotiations and may lead to a conclusion more quickly.
FAQs About How Long Does It Take to Settle Tax Debt with the IRS
How Long Does the IRS Give You to Pay Off a Tax Debt?
The IRS generally requires that you pay a tax debt off immediately if you don’t take steps to secure an extension or set up a debt settlement method. This might include establishing a payment plan or requesting Currently Not Collectible status. If you don’t take action, the IRS will send a notice of nonpayment when it assesses the tax you owe, and will require that you pay that amount. If you don’t, you could face collection actions.
How Long Does It Take for the IRS to Forgive a Debt?
How long it takes the IRS to forgive a debt depends on your circumstances. Generally, the IRS does not forgive a debt unless you work with them on a settlement plan, the terms of which affect when your debt is forgiven.
In a payment plan, your debt is forgiven once you pay off the entire amount through the plan. In an offer in compromise, your remaining debt is forgiven once you’ve paid the amount you agreed on.
How Long Does the IRS Have to Collect a Tax Debt?
The IRS has 10 years from the date a tax is assessed to collect the debt. If this deadline expires, the IRS cannot take action to collect the debt. However, there are ways the time limit can be suspended or extended, giving the IRS more time to collect. This can include if you negotiate a payment plan with the IRS, if you are in a combat zone, if you file for bankruptcy, or if you live outside the United States.
What Is the Minimum Payment the IRS Will Accept?
The minimum payment the IRS will accept is any amount of the debt that you are able to pay. However, the IRS expects that you will pay the full amount of your debt, and can take collection actions when you don’t. It’s important to work with the IRS on a payment plan if you can’t pay your debt. The amount the IRS will accept in a payment plan will depend on your financial situation and the debt you owe.
Hire a Tax Debt Settlement Lawyer
At TaxSmith, LLC, we have the years of tax code experience you need to secure a fair debt settlement. Reach out to our team today and learn how to address your tax debt.
