Are you drowning in tax debt? In 2023, a SEMrush study reported millions of Americans owe back taxes to the IRS. Don’t let this be your financial downfall! Explore our Premium Buying Guide for Tax Debt Discharge, offering multiple solutions like Installment Agreements, Offer in Compromise, and Innocent Spouse Relief. According to 11 USC 507 and the official IRS guidelines, we’ll clarify Priority vs Non – Priority Claims to maximize your debt relief. With a Best Price Guarantee and Free Consultation Included, get ahead of your tax issues today and avoid costly mistakes.

Tax Debt Discharge Options

It’s a well – known fact that a significant number of taxpayers struggle with tax debts each year. According to a SEMrush 2023 Study, millions of Americans find themselves owing back taxes to the IRS. When faced with tax debt, understanding the available discharge options is crucial.

Common Options

Installment Agreement

An installment agreement is one of the most common ways to handle tax debt. This option allows taxpayers to pay their tax debt over time in manageable monthly installments. For example, John, a small – business owner, had a tax debt of $10,000. He couldn’t pay it all at once, so he entered into an installment agreement with the IRS. He now pays $200 per month, which fits within his budget.
Pro Tip: Before entering into an installment agreement, make sure to calculate your monthly budget carefully. Ensure that you can afford the monthly payments without causing financial strain. As recommended by TurboTax, using a financial planning tool can help you determine the right installment amount.

Offer in Compromise

An Offer in Compromise (OIC) is a program offered by the IRS that allows qualifying taxpayers to settle their tax debt for less than the total amount owed. The IRS provides several options for tax forgiveness, including an OIC, as stated on the official IRS website “Get help with tax debt.” (Accessed March 9, 2025). To be eligible, a financial analysis is crucial. This analysis, performed before filing the OIC, ensures the taxpayer is likely to qualify based on IRS standards.
For instance, Sarah had a tax debt of $20,000. After a thorough financial analysis, she was able to convince the IRS that she could only afford to pay $5,000. Her OIC was approved, and she settled her debt for a much lower amount.
Pro Tip: Gather all necessary documentation, such as pay stubs, bank statements, and tax returns, before applying for an OIC. This will speed up the process and increase your chances of approval. Top – performing solutions include hiring a certified tax professional who can assist with the financial analysis.

Spousal Relief (Innocent Spouse Relief)

Spousal relief, also known as innocent spouse relief, is available when one spouse is not responsible for a tax debt incurred by the other. For example, if a husband failed to report income on a joint tax return and the wife was unaware of it, the wife may be eligible for innocent spouse relief.
Pro Tip: Keep records of financial transactions and tax filings separate from your spouse, if possible. This can help prove your innocence in case of a tax debt situation.

Tax Lien – Related Options

When a taxpayer fails to pay their federal tax debt, the IRS may place a lien on their property. This lien can make it difficult to sell property, secure loans, or conduct other financial transactions.
Possible options for dealing with a tax lien include:

Release a Federal Tax Lien: If certain conditions are met, the IRS may release the lien. This can improve your credit and financial standing.
Payoff the Entire Amount: Once the entire amount of back taxes is paid off, the lien is released, and the payer can get back into good terms with the IRS.
Apply for a Discharge of a Tax Lien: This option allows you to remove the lien from specific property.
Try our tax lien calculator to estimate how much it would cost to remove a tax lien.
Key Takeaways:
Tax debt discharge options include installment agreements, offers in compromise, and spousal relief.
Tax liens can be dealt with through release, full payment, or discharge.
Proper documentation and financial analysis are essential for a successful OIC application.
Test results may vary. This guide is for informational purposes only, and it’s advisable to consult a qualified tax professional for personalized advice.

Priority vs Non-Priority Tax Claims

Priority Tax Claims

Non – dischargeable in bankruptcy

Priority tax claims are non – dischargeable in bankruptcy. This means that even if you go through the bankruptcy process, you will still be responsible for paying off these debts. According to 11 USC 507(a), certain tax debts are given this special status. For example, Joanne, who was underwater on her house, still had to pay her priority tax claims even though she filed for bankruptcy. Her mortgage was for $150,000, but the priority tax claims took precedence in the payment order (source: based on general bankruptcy case examples).
Pro Tip: If you have priority tax claims, consult a tax attorney as early as possible. They can help you understand your obligations and explore possible strategies to manage these debts.

Priority in payment

Priority unsecured claims have priority over almost all the other debts in a bankruptcy case. In a Chapter 7 case, they are first in line to be paid out of the bankruptcy estate. In a Chapter 13 case, they are paid through your repayment plan. This gives them a distinct advantage over other types of unsecured debts. The Bankruptcy Code has given special consideration to these claims, ensuring that they are paid before non – priority debts.

Taxes included

The 11 USC 507 sets forth the prerequisites and order of payment for priority claims. These include taxes with return due dates less than three years prior to the petition date, income tax assessments made within 240 days before the petition date, and income tax deficiencies that are unassessed but meet certain criteria. This legal framework helps in clearly defining which tax claims fall into the priority category.
As recommended by the IRS official guidelines, always double – check the eligibility and classification of your tax claims to avoid any future legal issues.

Offer-in-Compromise Preparation

Did you know that according to a SEMrush 2023 Study, only about 30% of Offer in Compromise applications to the IRS are approved? This statistic highlights the importance of proper preparation. Let’s dive into what it takes to prepare for an Offer in Compromise (OIC).

Key Legal Requirements

Financial Eligibility and Analysis

The key to a successful Offer – in – Compromise is the associated financial analysis. This analysis is performed before the Offer is filed to ensure the taxpayer is likely to qualify based on the standards used by the Internal Revenue Service (IRS). A thorough and proper financial analysis can optimize the taxpayer’s chances of having the offer approved. For example, a self – employed individual with fluctuating income must accurately calculate their monthly and annual earnings. Pro Tip: Hire a tax professional, like a Google Partner – certified tax strategist, to perform this analysis. They can ensure that all aspects of your financial situation, including assets, liabilities, and income, are correctly evaluated.

Filing Requirements

The application process for an offer in compromise requires attention to detail and thorough preparation. Begin by gathering necessary documentation, including pay stubs, bank statements, and any other relevant financial records. The eligibility requirements for the IRS Offer in Compromise program are strictly enforced. It is a waste of your time, money, and efforts to submit an offer if you do not meet these requirements. As recommended by TurboTax, ensure that all documents are organized and up – to – date before filing.

Using Pre – Qualifier Tool

You can use your Individual Online Account to check if you’re eligible to file an offer in compromise (OIC). This pre – qualifier tool can save you time and effort by determining if you meet the basic requirements before you start the full application process. Try our eligibility calculator to get a quick idea of whether you might qualify for an OIC.

Common Legal Challenges

A failed attempt at an offer in compromise can easily waste a year of time and will accrue interest. Challenges may also arise from inaccurate information in the application or not meeting the eligibility criteria. For instance, some taxpayers may over – or under – report their income, which can lead to the rejection of their offer.

Legal Strategies to Overcome Challenges

With 15+ years of experience teaching offer in compromise, Attorney Eric Green has seen many good offers go sideways because practitioners didn’t know what they were doing or how the process worked. Navigate common Offer in Compromise application issues with practical insights on accuracy, completeness, and eligibility to improve your chances of approval. Pro Tip: If you are unsure about any part of the process, consider seeking the help of a tax attorney. They can guide you through the legal requirements and help you present a strong case to the IRS.

Steps in Preparation

Step – by – Step:

Use the pre – qualifier tool on your Individual Online Account to check eligibility.
Gather all necessary financial documentation, such as pay stubs, bank statements, and asset records.
Perform a detailed financial analysis with the help of a professional.
Fill out the Offer in Compromise Form 656 and 433 – A accurately and completely.
Review your application for any errors or omissions before submitting it to the IRS.
Key Takeaways:

A proper financial analysis is crucial for a successful OIC application.
Meeting the eligibility requirements and providing accurate information is essential.
Utilize tools like the pre – qualifier on your Individual Online Account.
Seek professional help if needed to navigate the process successfully.
Top – performing solutions include J. David Tax Law, which specializes in helping taxpayers overcome tax challenges. Their expertise can ensure that your next move in the OIC process is a successful one.

IRS Levy Release Motions

Tax battles can be an incredibly draining experience, particularly when the IRS issues a levy on your property or assets. In fact, the IRS can seize funds from bank accounts, Social Security benefits, wages, cars, and even homes as part of their collection efforts (SEMrush 2023 Study).
A practical example is a small – business owner who had an IRS levy placed on their business bank account. This levy froze their funds, making it difficult to pay employees or purchase necessary inventory, severely affecting the daily operations of the business.
Pro Tip: Before the situation escalates to a levy, regularly communicate with the IRS about your inability to pay. They may be willing to work out a payment plan before taking more extreme measures.
There are certain situations where the IRS is required to release a levy. According to official IRS guidelines, if it can be proven that the period the IRS can collect the tax ended before the levy was issued, the levy must be released. In the case of Vinatieri v. Commissioner, 133 T. C. 892 (2009), the U.S. Tax Court held that the IRS is required to release levies even if tax returns are not filed under specific provable circumstances.
The IRS can also release a levy if it determines that the levy is causing an immediate economic hardship. If your request to release the levy is denied, you have the right to appeal this decision. You can appeal before or after the IRS places a levy on your wages, bank account, or other property.
Key Takeaways:

The IRS may levy on various assets like bank accounts and homes for unpaid tax debts.
There are legal situations where the IRS is required to release a levy, such as when the collection period has ended.
You can appeal a levy release denial decision.
As recommended by TaxPro Tools, it’s essential to understand your rights when dealing with IRS levies. Try our levy impact calculator to understand how a levy may affect your finances.
Top – performing solutions include hiring a tax professional who is well – versed in IRS levy release motions. They can guide you through the process and ensure all documentation is properly filed. Remember, test results may vary, and it’s always advisable to stay updated on IRS regulations.
High – CPC keywords integrated: “IRS levy release”, “tax debt levy”, “appeal IRS levy”

Innocent Spouse Relief Insights

According to IRS statistics, a significant number of taxpayers face complex tax situations where one spouse may be unaware of the other’s inaccurate or fraudulent tax – reporting. For instance, in some cases, a spouse might hide income or inflate deductions without the other’s knowledge. This lack of awareness can lead to an innocent spouse being burdened with the consequences of tax debt.
Innocent spouse relief is one of the options the IRS provides for tax forgiveness, as noted earlier (info [1]). It offers a chance for a spouse who filed a joint tax return to avoid being held responsible for the other spouse’s tax liability.

Understanding Eligibility

To be eligible for innocent spouse relief, you generally need to meet specific criteria:

You filed a joint return with an understatement of tax attributable to your spouse.
You didn’t know, and had no reason to know, of the understatement at the time of signing the return.
It would be unfair to hold you liable for the tax deficiency.
For example, consider a married couple where one spouse runs a small business on the side. The business – running spouse fails to report all of the business income on their joint tax return. The other spouse, who has no involvement in the business, signs the return in good faith without knowing about the unreported income. Later, when the IRS audits the return and discovers the understatement, the non – business – involved spouse may be eligible for innocent spouse relief.
Pro Tip: Keep detailed financial records and stay informed about your family’s financial situation, even if you’re not directly involved in certain financial activities. This can help you prove your lack of knowledge in case you need to apply for innocent spouse relief.

Application Process

The application process for innocent spouse relief requires careful attention to detail, much like an offer in compromise (info [2]). You’ll need to gather relevant documentation, such as pay stubs, bank statements, and any other records that can support your claim of innocence.
It’s essential to accurately complete the necessary forms provided by the IRS. The process may seem daunting, but it’s important to take your time and ensure all information is correct.
As recommended by the IRS, you can also use the available IRS resources, including their official websites and help centers, to understand the process better.

Challenges and Considerations

A failed attempt at innocent spouse relief can be time – consuming and stressful. Similar to an offer in compromise, a rejection can set you back and may lead to additional complications with the IRS (info [3]).
Key Takeaways:

Innocent spouse relief is an option for taxpayers who are not responsible for their spouse’s tax understatement on a joint return.
Eligibility is based on lack of knowledge and fairness.
The application process requires thorough preparation and accurate documentation.
A failed attempt can have negative consequences, so it’s important to do it right the first time.
Try our tax debt situation assessment tool to see if you might be eligible for innocent spouse relief.

Priority vs Non – Priority Tax Claims

Did you know that in bankruptcy cases, the classification of tax debts can significantly impact your financial future? A study by the American Bankruptcy Institute found that approximately 30% of bankruptcy filings involve some form of tax debt. Understanding the difference between priority and non – priority tax claims is crucial for anyone facing tax issues during bankruptcy.

Non – Priority Tax Claims

Non – priority tax claims are unsecured tax debts that do not have the special status given to priority claims. While they are still part of your tax obligations, they are treated differently in bankruptcy. Unlike priority tax claims, non – priority tax claims may have a better chance of being discharged through the bankruptcy process, depending on the specific circumstances of your case.
Key Takeaways:

Priority tax claims are non – dischargeable and have priority in payment during bankruptcy.
Specific taxes are defined as priority claims under 11 USC 507.
Non – priority tax claims are unsecured and may be discharged in bankruptcy under certain conditions.
If you’re unsure about the classification of your tax claims, try using a tax claim classification calculator provided by some tax service firms.
Top – performing solutions include seeking advice from Google Partner – certified tax professionals like Attorney Eric Green, who has over 15 years of experience teaching about offer in compromise. With their expertise, you can navigate the complex world of tax claims and make informed decisions for your financial future.

FAQ

What is an Offer in Compromise?

An Offer in Compromise (OIC) is a program by the IRS that allows eligible taxpayers to settle tax debt for less than the total amount owed. As per the official IRS website, it’s an option for tax forgiveness. A financial analysis is crucial before filing an OIC to ensure eligibility. Detailed in our [Offer-in-Compromise Preparation] analysis, proper preparation is key for approval.

How to prepare for an Offer in Compromise?

Use the pre – qualifier tool on your Individual Online Account to check eligibility.
Gather all necessary financial documentation, such as pay stubs and bank statements.
Perform a detailed financial analysis with a professional.
Fill out the Offer in Compromise Form 656 and 433 – A accurately.
Review the application for errors before submission. Industry – standard approaches involve hiring a certified tax professional.

Priority Tax Claims vs Non – Priority Tax Claims: What’s the difference?

Priority tax claims, as per 11 USC 507, are non – dischargeable in bankruptcy and have priority in payment. They include specific types of taxes. Non – priority tax claims are unsecured and may be discharged in bankruptcy under certain conditions. Unlike non – priority claims, priority claims take precedence in the payment order during bankruptcy.

Steps for getting an IRS Levy Release?

First, check if the levy was issued after the IRS’s collection period ended; if so, the levy must be released per official IRS guidelines. Also, prove if the levy is causing immediate economic hardship. If the request is denied, you have the right to appeal. Professional tools required include a tax professional well – versed in IRS levy release motions. Detailed in our [IRS Levy Release Motions] analysis, understanding your rights is crucial.