Tax Debt

$10K in Tax Debt?

Are you in tax debt and looking for a solution to take back control of your life? We can help you! speak with a tax attorney about your options.

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What Is Tax Debt Relief?

Tax debt relief is designed by the Internal Revenue Service (IRS) to help lower a taxpayer or business owner’s tax bill. There are several types of tax debt relief programs, typically in the form of payment plans or partial or full debt settlement.

There are many situations that could allow you to qualify for tax debt relief, such as an unexpectedly high tax bill, a natural disaster hitting your home and making it difficult to file taxes and pay your bill, or other financial hardships. The important thing is if you need tax debt relief, you must act quickly to find a solution.

If you fail to pay your tax debt, the IRS will charge a failure-to-pay penalty of 0.5% of your unpaid taxes per month, plus interest (which starts accruing the day your taxes are due and continues until you pay your bill in full). If you delay payment long enough, you could pay up to 25% of your unpaid taxes in penalties.

How does tax debt relief work?

Essentially, tax debt relief is incentives and programs designed by the IRS to lower a taxpayer or business owner’s tax bill. Examples include tax credits and other temporary incentives, allowable deductions for pension contributions and tax debt forgiveness and the removal of any tax liens. Your specific tax situation will determine the best form of tax debt relief for you. It’s important to bear in mind the fact that the IRS does not openly promote tax debt relief. That’s why it’s good to seek out a reputable tax service to explore your tax debt relief options and determine which is best for you.


What qualifies you for tax debt relief?

Trying to catch up on your IRS payments can leave you in a financial crunch, and you can experience a great deal of stress, as well. Besides an unexpectedly high tax bill, a natural disaster may have recently swept through your area, making it challenging for you to successfully file your taxes and pay your tax bill. You may also be going through a financial hardship which can allow you to qualify for relief. There are many different situations that could qualify you for tax debt relief.

Tax debt relief programs

There are a number of tax debt relief programs offered by the IRS that can help make your tax debt more manageable. You must apply and be approved by the IRS for these programs, but here are some of your options:

  • Installment agreements: If you can’t pay your debt in full, but are able to make smaller payments overtime, an IRS installment agreement may work for you. This allows you to pay off your tax debt in smaller increments over a determined period of time. If this is approved, the IRS will stop any wage garnishment, seizure, or tax lien they’d placed, and may also reduce penalties you faced for failing to pay. You will, however, have nominal fees to pay if you enter an installment agreement.

    Even if you enter an installment agreement, you must continue to make your payments or the IRS could revoke your agreement. You must make every one of your payments, file all current and future returns and income taxes, and provide accurate information throughout the process.

  • Offer in compromise: This is when you’re able to negotiate a settlement that’s less than your outstanding balance. If approved, the IRS will forgive some of your debt in order to receive as much of the total bill as possible. However, to be approved, you must meet one of these conditions:
  1. Effective tax administration – you do not contest your collectability or liability, but can demonstrate that paying debt would create a significant financial hardship or distress.
  2. Doubt as to collectibility – you will never feasibly pay off your tax bill in full, though the IRS will ensure your assets and current and projected future income will not allow for them to enforce traditional collection means.
  3. Doubt as to liability – requires you to prove there is doubt the tax liability is correct, typically due to examiner mistakes, omitted information, or new information that would change how much you owe.
  • Currently not collectible: In this case, your tax debt is put on hold for a certain period of time. While in this status, the IRS will stop all other collection activities, but your debt may still accrue interest and other penalties for failing to pay. The IRS can also still file a Notice of Federal Tax Lien, which can significantly affect your credit score in a negative way. The IRS has 10 years to collect from you.

    To qualify for this, you must file any delinquent tax returns and provide details around your income status, current expenses, and other debts you have.

  • Innocent spouse relief: If you and your spouse file a joint income tax return, you are both responsible for the tax, interest, and penalties that result from the return. Even if it’s your spouse that reports income or claim credits or deductions incorrectly, you’re still liable. However, with this program, you may be able to prove you’re an innocent spouse and be exempt from taxes caused by the other person.

In most cases, the IRS tax debt relief will not forgive your debt completely. Due to the extensive qualifications, total debt forgiveness is very rare. You must be able to prove that you don’t have the means to repay your debt, have few assets the IRS would be able to levy, and don’t make an income above the minimum need for essential living expenses. Because these regulations are so strict, your better option would be to work with a professional on one of the programs listed above.

How to get tax debt relief

It’s possible to set up an IRS debt forgiveness program on your own, but the extensive detail you must provide and qualifications you must meet could make it difficult to get approved for a program, or a tax balance removed or reduced. It’s important to work closely with the IRS to understand your options and ensure you meet all requirements.

Or, you may choose to work with a tax professional who can help get IRS debt forgiveness approved. They will help analyze your finances and develop a case for the IRS based on your individual situation, providing all of the correct information and meeting requirements for the program.

Typically, whether applying yourself or working with a tax professional, there are a few steps in the tax debt relief process if you owe taxes to the IRS:

  1. Identify the issue (how much do you owe, does the IRS currently have any holds on your assets, etc.)
  2. Investigate the cause (did you provide incorrect information on your return, do you not have a high enough income, do you not have assets that can be used as collateral, etc.)
  3. Find a solution (which debt relief program would work best for your situation)
  4. Build a case (outlining why you can’t pay the tax debt and the proposed solution)
  5. Submit the case to the IRS
  6. Receive tax relief (if approved, your relief depends on the program you applied for)

The best form of tax debt relief will depend on your personal situation, and it’s important to work with a reputable tax service or the IRS directly to understand your options and decide what’s best for you.


How to pay off tax debt

If you don’t get approved for one of the above programs, or you prefer to take a different route to pay off your tax debt, you do have other options including:

  • Take out a bank loan or personal line of credit to cover what you owe. Try to get a lower interest rate than that charged by the IRS so that you owe less in the long run.
  • Take out a loan against a qualified pension plan, such as 401(k) or IRA. While you’ll lose some potential investment returns, and there will likely be some interest owed, it will likely be less than the penalties you’ll owe from tax debt.
  • Consolidate your taxes with a personal loan or home equity loan or line of credit.
  • Stay on top of your budget. Cut all unnecessary spending, and track what you’re spending everywhere else. Try to lower your bills or eliminate payments you don’t need, such as subscription plans or gym memberships.
  • Generate additional income, either by picking up a second job, starting a side hustle, or selling some of your gently used items that you no longer need.

Again, the most important part of repaying debt is starting to do so right away. As time passes, penalties and fees, as well as interest, will add to the total amount you owe and can make paying off the debt even more difficult.


Tax debt relief in a national disaster

If a natural disaster, like a hurricane or flooding, is a federally classified catastrophe and affects you and your city, the IRS may file an automatic tax extension so you can pay taxes you owe later in the year.

To be eligible, you must reside in or your business must operate out of a federally declared disaster region and there must be natural devastation. Additionally, if you have property loss that’s not covered by homeowners insurance, it may be tax-deductible.


Benefits of tax debt relief

The primary benefit of tax debt relief is your debt may be lowered or even eliminated (in rare cases). The IRS will work with you to repay your debt or lower your total amount so that you avoid financial ruin and other penalties.

For example, when you’re unable to pay your tax bill in full, the IRS can garnish your wages, meaning your earnings can be withheld by your employer for the payment of debt. However, with tax debt relief, you can stop wage garnishment and keep those funds for your other financial needs.

Another thing the IRS may do is implement a bank levy, which allows them to take funds directly from your bank account. This freezes your account until the funds are removed and sent to the IRS, and they use those funds to pay down your debt. Tax debt relief helps prevent this action, so you don’t have to worry about your debit card being declined or your savings account drained.

The IRS can also put a lien on your property, which can result in seized proceeds when you sell. Or, they could place a tax levy, which means they can take the property and sell it to recoup the taxes you owe. Tax debt relief helps ensure none of this happens.

Does tax relief hurt your credit?

Tax relief doesn’t hurt your credit score, but the IRS will report overdue tax debt to the credit bureaus. So, if you owe taxes to the IRS, this will hurt your credit score. Failing to make payments can also hurt your credit score, as could taking out a loan or using a credit card to pay your tax bill because it increases your credit utilization. Once your tax debt is paid off, your score will likely rebound.

Are tax debt relief companies legitimate?

Some tax debt relief companies are legitimate, but others are not. They may charge massive non-refundable fees, and still not get your debt relieved. They may even take your money and never send the proper paperwork or application to the IRS. Be sure to look out for the signs of tax debt relief scams.


Call our tax experts today for a free consultation. Speak to a tax expert about Tax Debt Relief.

Monday to Friday – 8:00 am to 7:00 pm
(all times Eastern)

States Accepted – Alabama, Alaska, Arizona, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming.

Debt Relief

Debt Relief

We Are The Solution
Get Control of Your Debt.
Get relief and regain financial peace of mind.

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What Is Debt Relief?

Debt relief refers to a variety of strategies for making debt easier to handle. What debt relief looks like for you may hinge on the types of debts you have and what you need help with most.

For example, you may need credit card debt relief if you’re struggling to pay off credit card bills. Or you may be interested in debt consolidation if you have several types of debt to pay off.

Credit counseling, debt management plans and debt settlement also fall under the debt relief umbrella. While the means are different, the end goal is similar. Debt relief is about helping people find a workable path for eliminating debt.

Types of Debt Relief

There are five major forms of debt relief. Though the methods and timeframe for each one varies, it’s best to allow 3-5 years to erase the debt completely and rebuild your credit.

Here are the five options:

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Credit counseling

Sometimes debt relief is as simple as building a budget to see where money comes and goes and cutting back where there is excessive spending. Unfortunately, only 40% of consumers work off a budget. Counselors from nonprofit agencies are experts at budgeting and provide this service for free.

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This is a last-ditch choice when the other four won’t work. However, if it’s going to take more than five years to pay all your bills with one of the other four options, this is a workable solution. You get a second chance, a fresh start, and hopefully, you’ve learned enough not to repeat mistakes again.

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Debt consolidation

Gather all your unsecured debts (i.e. credit card bills) and consolidate them into one monthly payment. If your credit score is good enough, you should lower both your interest rate and monthly payment.

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Debt management

A nonprofit credit counseling agency works with lenders to reduce (sometimes dramatically) the interest rate on your debt and lower the monthly payment to a level you can afford. Credit scores are not a factor for joining the program, but if you miss payments, any concessions you received could be terminated.

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Debt settlement

A company negotiates with your lenders to settle a debt for less than what is owed, which sounds too good to be true and usually is. Lenders are not obligated to settle and some won’t. Also, your credit report is damaged for seven years.

How Does Debt Relief Work?

Debt relief typically works this way:

you enroll your unsecured accounts into a debt relief program with a debt settlement company. You stop making payments to your creditors. You and your debt consultant come up with an amount that you can afford, and you put that money into a debt settlement savings account each month.

Negotiations begin with creditors when your debt consultant feels that you have saved enough to make an acceptable offer. At that point, your debt consultant would approach the first creditor about settling your account. This typically takes four to six months.

You continue to make your monthly payments into your debt settlement savings account as your accounts are settled one by one. You pay no fees to a debt settlement company until it settles a debt for you. If you can come up with money faster – perhaps by cutting expenses or selling things you don’t need – you can speed up the settlement process.

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What to Know Before You Apply for Debt Relief

Debt relief programs can help you get out from under your debt burden. But it’s a decision that needs to be made carefully. It isn’t necessarily a perfect solution and there may be some serious trade-offs to make.

Before getting started with debt relief, here are three important things to consider.

  • Interest

    Debt consolidation loans or lines of credit and 0% balance transfer offers can provide credit card debt relief. But consider the cost involved.

    Ideally, consolidating debt results in a lower interest rate. A lower APR means more of your monthly payment goes toward the principal so you can repay your debt faster. You also accrue less interest over your repayment period.

    If you’re interested in how to consolidate debt, first consider the rates you may qualify for based on your credit score. And, if you’re interested in something like a debt management plan, ask whether a rate reduction is a possibility when working out repayment terms.

  • Fees

    There may be fees associated with some debt relief options and it’s helpful to factor those in when deciding whether the cost is worth it.

    For instance, credit counselors may or may not charge a fee to help you create a budget and spending plan. With debt consolidation loans, there are loan origination fees and prepayment penalties to watch out for. If you’re using a 0% APR balance transfer credit card to consolidate debt, then you may pay a balance transfer fee.

    If you’re interested in a debt management plan, there may be a monthly fee required to enroll. And companies that negotiate debt settlement also can charge a fee for their services, sometimes as much as 15% to 25% of the amount settled or forgiven.

    Since fees can add to the total amount you have to repay, it’s important to know what you’re paying up front and how it can add up over the long term.

  • Scams

    When you’re interested in debt relief services, whether it’s credit counseling, a debt management plan or debt forgiveness, it’s important to ensure that the company you’re working with is legitimate. Otherwise, you run the risk of falling victim to a debt relief scam.

    You also want to understand the differences, as outlined above, among debt consolidation, debt management plans and debt settlement. Not all debt relief providers use these terms clearly enough for you to understand what you’re getting into unless you read or listen very carefully.

    As you compare debt relief companies, be aware of the following red flags:

  • Demands for fees that must be paid before services can be offered
  • Lack of transparency in explaining what the company does or provides
  • Requests for access to personal or banking information
  • Promises or guarantees that seem too good to be true

The Consumer Financial Protection Bureau (CFPB) maintains a database of consumer complaints regarding debt relief companies and other financial services providers. You can check the database, along with the Better Business Bureau, to verify a company’s reputation.

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What kinds of debt can I settle with debt relief?

Debt relief is not for loans secured by collateral, like mortgages or auto financing. If you stop paying those secured creditors, they can foreclose on your home or repossess your car. However, debt relief can work with unsecured creditors. Here are the most common types of unsecured loans that you might be able to settle with debt relief:

  • Credit card debt
  • Unsecured personal loans
  • Medical bills
  • Private (not government-guaranteed) student loans
  • Peer-to-peer (P2P) loans

When attempting debt settlement, you could be dealing with the original creditor, a debt buyer, or a collection agency.

How Do You Qualify For Debt Relief?

There is no set standard for qualifying with Money Fit due to the credit counseling services provided is available, at no cost, to any individual seeking to improve their financial situation.

After the consultation, if you and your counselor decide to proceed with a debt management plan, the qualifications for our organization to be of assistance is that there are the following items in place:

  • There is an established hardship or need for the service.
  • The debt added to the repayment program must be unsecured.
  • You must show the ability to make one consolidated monthly payment.
  • There is a maximum amount of debt, however, generally, we advise and show consumers how to repay the debt on their own if that amount is under $1,000.
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How Does Debt Relief Affect Your Credit?

Debt relief has the potential to affect your credit reports and credit scores, although the actual impact depends on which option you choose and where your credit score was to start.

With debt settlement, you may need to be several months’ behind on payments in order to negotiate a payoff agreement. Most of the damage to your credit may already have been done, as late payments can be detrimental to your score.

A debt management plan may have a minimal impact on your credit if your creditors continue to report the account as paid as agreed. Credit counseling may have no impact on your credit at all. It could even help to raise your credit score if you’re able to reduce debts and make payments on time after working out a repayment plan.

Before opting in to any type of loan or credit card relief plan, read the fine print first to check for any mention of credit score impacts. It’s also helpful to monitor your credit reports and scores regularly to detect any changes to either one.

What Is The Best Debt Relief Program?

The best approach to achieving a debt-free life will usually lead the consumer through the following options:

  1. Try to pay on your own, including negotiating with your creditors and the use of consolidation loans/balance transfers
  2. Work with a nonprofit consumer credit counseling agency
  3. Consider if debt settlement might be helpful, particularly with collection accounts
  4. Speak with a bankruptcy attorney

Repaying your debt on your own is the best first step because you minimize the fees you pay to others. If you cannot negotiate lower interest rates and repayment terms with your creditors, a credit counselor should be your next stop. What support is there for this recommendation?

For individuals and households with a steady income who are dealing with or have already tried to work directly with their creditors but to no avail, nonprofit programs offer the best possibility for success in repaying 100% of their debts over the short term (within 5 years or less).

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Debt relief advantages and disadvantages


  • Repayment of debt is made with a low-interest rate, or the sum paid is lower than what one owed the actual amount to the creditor.
  • The debt can be repaid quickly in a short period, usually in 2 hours-4 years, under a good debt settlement program.
  • It prevents an individual or a company from falling into a debt trap wherein the pressure of paying a debt. More debts are taken to pay the previous debt owed, and thus sooner or later, the debt figures become a huge amount.
  • As mentioned above, there are four types of debt relief before we finally move into the last type, which is bankruptcy. Thus, the program typically protects an individual or business from getting bankrupt.


  • The main disadvantage of debt relief is that though some of the debt is written off, this also comes with lowering the credit score. That is because the late payments of the written-off amount are recorded at the credit rating agency, and thus the credit score is reduced.
  • This program comes with many hidden charges that need to be paid to the debt relief companies, which may be higher.
  • If the amount we settle or are forgiven is more than $600, this is taxable income, and we must pay tax on it.
  • The creditor can file a debt collection lawsuit against the debt seeker.
  • There is no guarantee the lender will be obligated to accept the settlement offer. In addition, some lenders do not like working with debt relief companies, and thus the debt seeker can be fined more late charges and penalties on the existing debt.

How much do debt relief programs cost?

Common debt relief program charges work out to 15% to 25% of the total debts enrolled in a program. This means that, if you sign up for a debt settlement program with $10,000 in credit card debt, you may end up paying $1,500 to $2,500 to get it resolved.

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What Is The Difference Between Debt Relief And Debt Consolidation?

Debt Relief

  1. Negotiate for a lower total outstanding and repay it in a pre-agreed timeframe
  2. Late payments and non-payment records may hurt your credit score
  3. Nil charges when you initiate it on your own and negotiate with the lender
  4. You can settle debts for less than what you actually owe and escape collection proceedings, such as creditor lawsuits.

Debt Consolidation

  1. Combine all your loans into one single loan with a lower rate of interest and attractive repayment tenure
  2. Helps improving your credit utilization ratio and thus your credit score
  3. Various charges and fees included similar to a new loan
  4. Depending on the length of the restructured loan term, you could end up paying more in total interest over time than what you originally owed

Is it good to do a debt relief program?

Debt relief programs aren’t for everyone. They are a solution for serious debt problems, not a get-out-of-jail-free card for people who just don’t want to pay what they owe. Consider both the pros and cons of debt relief before committing to a program.

Debt relief may be a good solution if you can’t afford the minimum payments on your debt or if your debt is creating hardship for your family. It can be a better solution than bankruptcy if you don’t want a public filing, if you have a previous bankruptcy, or if you don’t want a bankruptcy court taking total control of your finances.

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Struggling with Debt Relief

Call the Debt Relief Helpline to speak with a debt counselor. We help you resolve your debt faster for a fraction of what you owe.