If you owe $16,000 to $25,000 to the IRS, you need a solution to your problem. Your options include payment plans, an Offer in Compromise, and several others. Select the best option for you, but don’t delay. The IRS will work with you, but they do not forgive or forget.
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. We’re going to review your options and give you the information you need 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. Since you made that money, 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.
- Set up an IRS payment plan.
- Apply for an offer in compromise.
- See if you qualify for a temporary delay in collection, disaster relief, or innocent spouse relief.
- Find a way to pay.
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 the money 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 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.
Qualification/ Form(s) Needed
If you owe $16,000
Streamlined/ Form 9465
If you owe $17,000
Streamlined/ Form 9465
If you owe $18,000
If you owe $19,000
Streamlined/ Form 9465
If you owe $20,000
Streamlined/ Form 9465
If you owe $21,000
Streamlined/ Form 9465
If you owe $22,000
Streamlined/ Form 9465
If you owe $23,000
Streamlined/ Form 9465
If you owe $24,000
Streamlined/ Form 9465
If you owe $25,000
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 “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 $24,999, 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.
If You Choose an Installment Plan
If you owe $16,000 to $25,000 to the IRS and you choose an installment plan, the installments will be a significant addition to your debt load. You will have to prioritize them over all other debts. Other creditors may push you harder and their demands may be louder, but none of them can do what the IRS can do.
In a worst-case scenario, remember that many other debts can be discharged in bankruptcy. Tax debts usually cannot be.
The installments will be a burden, but you will need to pay them.
Option 2: Settling Your Debt for Less if You Owe the IRS $16k-$25k
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 2020 alone, the IRS accepted 14,288 “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. Here were a handful I found for $26k to $50k owed. These should be taken with a grain of salt, as customer reviews aren’t always legitimate!
Initial Amount Owed
Resulting Amount Owed
Jonathan owed $23,340
Crystal Owed $18,000
Gary Owed $25,000
Kevin Owed $24,000
Tim Owed $22,200
Pending for $744
Josh Owed $25,000
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:
- 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.
Should You Hire a Tax Relief Company
You can apply for tax relief on your own. The IRS has set procedures and available forms to apply for installment plans, offers in compromise, and other programs that it offers. If you have a relatively simple problem a DIY approach may be what you need.
If your situation is less simple, or if you look at the forms and have no idea where to begin, a tax relief company could be a better option. Just be sure to do your research carefully and select a credible partner. Don’t fall for the first ad you see: there are a lot of players out there who are not credible.
Offer in Compromise Mistakes
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!
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
A tax relief company probably cannot make your tax debt disappear. That is not a reasonable expectation, and a legitimate company will tell you that upfront. There are still reasons to consider using a credible tax relief company. 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 importantly, 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.
🔎 Learn more about tax relief
Alternative Ways to Pay the IRS
Tax debt is a serious problem. The IRS has powers that no other creditor has and can come after you in ways that no other creditor can. Your first, best option is simply to pay them, in any way possible.
Consider these options.
- Borrow from a retirement account, like a 401k or IRA.
- Borrow from your home equity using a home equity loan or HELOC.
- Use a personal loan
Borrowing money isn’t a perfect solution. You will have to make the payments on time or your credit will suffer. If you use your home equity you could lose your home if you default. It’s still better than owing money to the IRS.
Is Bankruptcy a Solution?
Bankruptcy is not a direct solution to a tax debt. Most tax debts cannot be discharged in bankruptcy, so you will have the same tax debt after bankruptcy that you did before.
Bankruptcy could still help. If you are unable to pay your tax bill because you are buried in other debts, bankruptcy could eliminate many of those other debts. You will still owe the tax debt, but you’ll have fewer other demands on your plate.
Bankruptcy is an extreme solution that will only be appropriate if your case is really desperate. Most bankruptcy lawyers offer free consultations, so if you’re considering this option you can try consulting a lawyer to review your options.
Non-profit credit counseling agencies also provide free consultations that can help you clarify your options. They will not be able to resolve your tax debt, but they could help you manage your other debts or decide whether to consider bankruptcy.
The Bottom Line
If you owe $15,000 to $25,000 in taxes, you need to make some decisions and act immediately. We hope this article has helped you clarify your options and decide whether to take a DIY approach or consider retaining a reputable tax relief company.
Get Professional Help!
Compare multiple tax relief companies at one time, pick the best option, and get help managing your tax debt.
🔎 Tax Debt Resources
Managing Tax Debt
- How to Tackle Tax Debt: What to Do When You Owe Money to the IRS
- What Happens If I Can’t Pay the IRS?
- What If I Owe the IRS But Have Unfiled Tax Returns?
- Can I Settle with the IRS Myself?
- What is an Offer in Compromise (And How to Get It Approved)
- 5 Easy Steps to Set Up an IRS Payment Plan
- How to Settle Tax Debt with the IRS Fresh Start Program
- What is the Statute of Limitations on IRS Debt?
- Best Tax Relief Options If I Owe $10,000 to $15,000 to the IRS
- Tax Relief Options If I Owe $16,000 to $25,000 to the IRS
- Best Tax Relief Options If I Owe $26,000 to $50,000 to the IRS