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Summary: There are two ways to pay back the IRS if you owe $16,000 to $25,000 in taxes. You can set up a payment plan or try to get part of your debt forgiven.  Let’s review your tax relief options based on your situation.

Do you owe $16,000 to $25,000 in taxes to the IRS? Are you wondering how to pay them off?

If you’ve asked:

  • What’s the cheapest way to pay off the IRS?
  • Can my tax debts be forgiven?
  • Can I solve this on my own or do I need professional help?
  • How do I stop the letters and other IRS actions?

You’re in the right place!

In this article, we’ll look at your tax relief options, including applying for debt forgiveness (Offer in Compromise), setting up a payment plan (Installment Plan), and considerations for doing it yourself or seeking help from a tax relief company.

This article is not another scare piece telling you how the IRS can garnish your wages or file a tax lien on your property. You already know that.

By the end of this article, you’ll be able to make a decision about your next step, whether it will be on your own or choosing to hire an expert to help.

The Big Problem Owing $16,000 to $25,000 to the IRS

Here’s the brutal truth about having $16,000 to $25,000 of IRS tax debt.

The IRS knows that since you accumulated that much due in taxes, you made some good money along the way. They assume that you can afford to pay your taxes!

But the truth is that you’re reading this article because you don’t have $17,000 or $24,000 sitting around to pay the IRS back. If that’s true, there are tax relief options you can use to get the IRS off your back and end your tax problems.

  • Setting up an IRS payment plan
  • Settling your debt for less
  • Use a personal loan or retirement funds

Let’s take a closer look at these methods.

Option 1: Set Up an IRS Payment Plan

Let’s say you owe $18,000 or $19,000 to the IRS, but don’t have that kind of money laying around to pay them back.

Give yourself a break. 8% of all U.S. taxpayers are delinquent. You are not alone! In fact, in a recent tax debt study conducted by Solvable, the average IRS debtor in the U.S. owed $16,849.

The good news is that the IRS allows you to set up a payment plan, known as an Installment Agreement. You can apply for using IRS Form 9465.

If you can’t afford a lump sum payment of $16,000 or $22,000, you may be able to set up a payment plan with monthly payments that you can afford.  You can pay over 72 months (6 years).

Installment Plan Monthly Payments

Here are some sample monthly payments including the qualifications for each and the forms needed.  If you cannot afford these payments, you should skip to the next sections to see your other options.

These requirements will be the same for a debt from $16,000 to $24,999. At $25,000 some new requirements come into play.

Amount Owed

*Monthly Payment

Qualification/ Form(s) Needed

If you owe $16,000

$222.22

Streamlined/ Form 9465

If you owe $17,000

$236.11

Streamlined/ Form 9465

If you owe $18,000

$250.00

Streamlined/

Form 9465

If you owe $19,000

$263.89

Streamlined/ Form 9465

If you owe $20,000

$277.78

Streamlined/ Form 9465

If you owe $21,000

$291.67

Streamlined/ Form 9465

If you owe $22,000

$305.56

Streamlined/ Form 9465

If you owe $23,000

$319.44

Streamlined/ Form 9465

If you owe $24,000

$333.33

Streamlined/ Form 9465

If you owe $25,000

$347.22

Must Qualify/ Form 9465-FS Parts I and II

*Monthly payment is an estimate only and does not include an up-front application fee.  The IRS accepts most installment plan requests, but acceptance is not guaranteed.

Why Set Up an Installment Agreement

There are many benefits to a payment plan.

  • Manageable monthly payments
  • Getting the IRS off your back
  • Pause IRS collection attempts

Just be aware that if you enter into an installment agreement and then have difficulty paying them on time, the IRS is notorious for demanding the full balance you owe or filing tax liens and IRS levy actions. This may be one reason to try to offer them a lower amount than what you owe them.  (Offer in Compromise)

Quick Tip: Once you start an installment plan, you will have a harder time qualifying for debt forgiveness (Offer in Compromise) later.

Qualification and Setup

For $16,000 to $24,000, acceptance of your installment plan is called “Streamlined.”  This means it’s a quick application process but approval is not guaranteed.  If you owe $25,000 or more to the IRS, you will fill out an additional section in Form 9465, and each application will be manually reviewed for approval. 

In either case, you need to be up to date on all tax filings and other taxes owed, and you must not have already requested an installment agreement in the past 5 years.

If the IRS believes you can pay your taxes, they will not approve the request.

Fees & Application

If you owe $16,000 to $24,000, you will use Form 9465 to apply. You only need to fill out Part I.

If you owe, $25,000, you need to also complete Part II.

Setup fees range from $31 to $225, depending on whether you set up a direct debit from your bank or pay by check, and whether or not you use their online application.

The absolute cheapest way to go is to use an online payment agreement (OPA) application at IRS.gov/OPA and set up a direct debit, which only costs a one-time $31 setup fee. This could be waived for lower-income applicants.

Who is a Good Candidate for an Installment Plan?

If you sincerely cannot pay the full lump sum you will probably be approved for an installment plan.

(There’s a difference between “cannot” and “don’t want to” pay)!

Whether your tax debt was incurred in the most recent tax year, or you owe years and years of back taxes, even if you’ve had your wages garnished or the IRS has a tax lien on your property, or even if they’ve entered your bank account and withdrawn money, the installment plan could work for you and could immediately pause IRS collection actions.

Can You Do It Yourself?

Yes, you absolutely can, but be very careful! The IRS is quite picky about their forms being filled out perfectly.  Yes, you can do it on your own, but if you run into any questions along the way or want a second opinion, we recommend you contact our friends at Optima Tax Relief.  They’ve helped settle millions of dollars in tax debt.

Option 2: Settling Your Debt for Less if You Owe the IRS $10k-$15k

The first thing most people who have over $16,000 in tax debt want to do is see if they can get the debt forgiven.

Tax debt can be forgiven or reduced.

In 2018 alone, the IRS accepted 24,000 “Offers in Compromise” amounting to $261.3 million of forgiven debt. An Offer in Compromise is an offer to settle with the IRS for less than the amount you owe them.

That sounds great, but the IRS accepted only around 40% of the applications it received.

Does it Work?

You’ve probably heard the radio commercials where Freddy owed the IRS $18,000 in back taxes, hadn’t filed his taxes in 5 years, and the IRS had levied his bank account for 25% of his monthly income.  Then Hero Tax Relief company comes along and gets him up to date on Freddy’s filings, gets the IRS out of his bank account, and settles his $18,000 tax debt for $100.

Is this common?

Yes and no.  This sort of result really does happen every day.  (See real examples below from people who owed $16k to $25k)

But in most cases, you won’t settle for $100.

Following the math above, with $261.3 million forgiven divided by 24,000 cases, the average Offer in Compromise accepted is $10,886.

Delinquent taxpayers submit offers for anywhere from hundreds to hundreds of thousands of dollars, but I’d still say this is a good number for you since it’s significantly less than any number between $16k to $25K.

If you settled a $20,000 debt for $10,000 and set up a payment plan for that, you’d still owe but you’d be in much better shape than you were before.

Examples of Success:

I browsed through dozens of testimonials from tax relief companies to find these.  Of course, there were dozens and dozens I found for a higher starting balance.  These are a few examples that started with $10k to $15k owed.

Initial Amount Owed

Resulting Amount Owed

See Testimonial

Jonathan owed $23,340

$100

Optima Tax Relief Site

Crystal Owed $18,000

$500

Google Reviews

Gary Owed $25,000

$0

Best Company Reviews

Kevin Owed $24,000

$750

Google Reviews

Tim Owed $22,200

Pending for $744

Optima Tax Relief Site

Josh Owed $25,000

$2300

BestCompany Reviews

Please be aware there’s no magic to the starting amounts owed above. Just because you owe $18,000 like Crystal, that doesn’t mean you’ll settle with the IRS for $500. Each individual case is different.

Offer In Compromise (OIC) Requirements – Will You Qualify?

The Offer in Compromise sounds like a dream come true.

The trick is qualifying. It may not be easy.

For the 24,000 offers the IRS accepted in 2018, the IRS received 59,000 offers.  In other words, they accepted about 41% of the offers.

The IRS will not accept an Offer in Compromise if they believe you can pay the debt in a lump sum or by payment plan.

In each case, they’ll consider your:

  • income
  • assets
  • debt
  • and more!

In order to qualify, you must offer the IRS an amount equal or greater to what the IRS calls “the reasonable collection potential.” (RCP)

The good news?

If you’ve got little to no assets and/or very heavy debt, there’s a good chance your offer will be accepted.  

Solvable has a great calculator that will help you estimate whether you can qualify for an Offer in Compromise.

Making an Offer On Your Own VS. Hiring a Tax Relief Company

In order to apply for an Offer in Compromise, you must fill out

  • IRS form 656, Offer in Compromise
  • Form 33-A, Collection Information Statement for Wage Earners and Self Employed Individuals
  • Form 433-B (if you own a business)

Be careful doing this on your own! You can definitely file the forms on your own, but the forms are long and detailed and the IRS requires them to be filled out perfectly!

Offer in Compromise Mistakes

Tax relief expert (and former IRS revenue officer) Jeffrey McNeal says when he processed offers, he saw tons of mistakes made on the forms, even when prepared by CPAs and enrolled agents!

If you mess up the forms, this could lead to rejection or time delays.

To ensure accuracy, you should consider professional help.

Say, for instance, you owe the IRS $22,000 or $23,000 and submit an Offer in Compromise…  

You need to make sure all the math is right and all fields are filled out properly on Form 433, but that’s just the starting point.  

Only 41% of submissions get approved so it must be done perfectly to give you the best chances.  If it goes to appeal, you will not only need to fill out a form. McNeal states that just about the only ones to win their appeals were people who backed up their claims with:

  • The Internal Revenue Code (IRC)
  • The Internal Revenue Manual (IRM)
  • Existing case law

Ask yourself: Do you feel qualified to reference the above codes and manuals in your appeal for tax relief?

The Internal Revenue Code is a massive document made up of over 9,000 sections, while the Internal Revenue Manual is made up of 39 parts (also massive), and we know there are tens of thousands of cases in case law.

Knowing what applies and what doesn’t to an Offer in Compromise would be nearly impossible for a non-professional.

Why Consider Hiring a Tax Relief Company

While it would be a dream come true for a tax relief company to help you wipe out your tax debt, there are other reasons to consider using them.  They also: 

  • provide guidance on audits
  • help set up payment agreements with the IRS
  • help get current on any unfilled tax returns 
  • some may be able to stop potential penalties such as wage garnishments

Most important, they pause the stress of dealing with the IRS. Typically any case submitted to the IRS takes months (or years) to review.  While waiting for their response, the IRS typically suspends any collection activities, and will often lift wage garnishments or even return money levied from your bank account, as is often the case with an Offer in Compromise submission.

Alternative Ways to Pay the IRS

Don’t jump into settling with IRS if you can find a cheaper, alternate way to pay them.  Consider the following:

  • borrow from a retirement account (401k or IRA)
  • borrow from your home equity
  • get a personal loan

Here are the rules for borrowing from your 401k.

Look into Home Equity Loans and Home Equity Lines of Credit (HELOC) to use your home equity.

For personal loans, we recommend you visit Lending Tree.  

Conclusion – Seek Help!

There are many things in life you can do on your own, but we would not recommend tangling with the IRS.  If you owe $16,000 to $25,000 in taxes, we recommend you at least get some professional advice before choosing your course of action.

Get Professional Help!

Compare multiple tax relief companies at one time, pick the best option, and get help managing your tax debt.

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