Best Tax Relief Options If I Owe $26,000 to $50,000 to the IRS

If you owe $26,000 to $50,000 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.  

If you owe $26,000 to $50,000 in taxes, you’re looking for real answers.

You don’t need to hear about how the IRS can garnish your wages or levy your bank account.  You likely already know (or are even experiencing this)!

What you need to know is:

• 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?

In this article, we’ll look at all of your options. None of them will make your tax debt go away, but one of them might provide a way to manage your problem. Hopefully, it will help you make the right decision about your next step.

The Biggest Problem Owing $26,000 to $50,000 to the IRS

Let’s say you owe $30,000 of IRS tax debt.  You most likely can’t cut a check for that.

But the IRS doesn’t see it that way.

In fact:

The IRS is MORE likely to think you can pay than someone who owes a lesser amount.

They know that you must have earned a LOT of money to rack up that much in taxes. For example, maybe you earned $100,000 in a single tax year, which created a tax burden of $35,000.  But after late fees and penalties, it grew to 40k.  So because at some point you earned that much money, they automatically assume you should be able to pay your taxes!

But the truth is:

Whether it’s $45,000 or $50,000 that you owe to the IRS, either way,  you don’t have that sort of money sitting around to pay them back.

If that sounds like your situation, don’t panic.   There are many things you can do to get the IRS off your back and resolve your tax problems including:

• 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.

Option 1: An Installment Agreement

Let’s say you owe $30,000 or $50,000 to the IRS, but don’t have the money laying around to pay them.

Give yourself a break.  8% of all U.S. taxpayers are delinquent.  You are not alone!

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

So even if you can’t afford a lump sum payment of $35,000 or $40,000, you may be able to set up a payment plan with monthly payments that you can afford.  The beautiful thing about the installment plan is they let you pay over 72 months (6 years).

You will pay an up-front fee to set up an installment agreement. The fee is currently $105 for non-direct debit agreements, $52 for direct debit agreements, and and $45 for reinstatements. The fee is reduced to $43 for taxpayers with income at or below poverty guidelines established by the certain U.S. Department of Health and Human Services poverty guidelines.

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.

Please note that from $26,000 to $50,000, you won’t see any changes in the qualifications or forms needed.  In fact, they’re even the same as if you owe the IRS $10,000 to $15,000 in taxes or $16,000 to $25,000 in back taxes.  But at $26,000 we have some new requirements.

*Monthly payment is an estimate only and does not include the mandatory up-front application fee.  

The IRS accepts a high percentage of 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.
• The Relief of getting the IRS off your back.
• The IRS will pause collection attempts

Just be aware that if you enter into an installment agreement and then have difficulty paying them on time, (if you default) 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 a debt of $26,000 to $50,000, you will fill out an additional section in Form 9465, and each application will be manually reviewed for approval. 

To qualify you will 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 that you have the capacity to pay your taxes, they will not approve the request.

Fees & Application

Since you owe between $26,000 to $50,000, you will use Form 9465 to apply and will need to fill out Part I and 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?

First, you sincerely cannot pay the full lump sum.

(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 will 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 $26,000 to $50,000 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 $26k-$50k

The first thing most people who have over $26,000 in tax debt want to do is see if they can get part of the debt forgiven.

The IRS does reduce some debts. It’s not easy, but it’s possible. An Offer in Compromise is an offer to settle with the IRS for less than the amount you owe them.

The good news: in 2020 alone, the IRS accepted 14,288 “Offers in Compromise” amounting to $261.3 million of forgiven debt.

The bad news: in 2019 the IRS rejected 67% of the applications it received for Offers in Compromise.

An Offer in Compromise is not impossible. People do apply successfully and they do see substantial reductions in their tax bills. It’s far from a sure thing, though, and it’s not something to count on.

How Much Could You “Settle” For?

You’ve probably heard the radio commercials where Freddy owed the IRS $30,000 in back taxes, hadn’t filed his taxes in 5 years, and had the IRS levy his bank account for 25% of his monthly income.  Then Hero Tax Relief company comes along and gets him up to date on filings, gets the IRS out of his bank account, and settles his $35,000 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 $26k to $50k)

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.

I understand that number doesn’t mean much, since 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 $26k to $50K.

Say, for example, you settled a $50,000 tax debt for $35,000 and set up a payment plan based on the smaller figure.  You wouldn’t be getting a free pass, but you’d be paying a lot less.

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!

Please be aware there’s no magic to the starting amounts owed above.  Just because you owe $28,000 like Crystal, that doesn’t mean you’ll settle with the IRS for $500.  Nor does a couple of thousand dollars make a huge difference. The IRS won’t see a $37,000 debt too differently than if you $39,000.  Each individual case is different.

Offer In Compromise (OIC) Requirements

The Offer in Compromise sounds like a dream come true.

The trick is qualifying.  Beware!  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 through a 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 to or greater than what the IRS calls “the reasonable collection potential.” (RCP)

That’s a complicated way of saying that you need to offer at least as much as they think they can squeeze out of you, based on your income and on assets such as your home, cars, investments, and savings.

The good news?

If you have few to no assets and/or very heavy debt, there’s a better chance your offer will be accepted. You’ll also have a better chance of acceptance if your income has been dramatically reduced or your costs increased – say by illness, job loss, or similar factors – since you incurred your tax bill.

Other Options

There are several other possibilities for reducing tax debts.

• Disaster victims. If you have suffered economic loss due to a natural disaster you may qualify for tax relief in disaster situations.
• Innocent Spouse Relief. If you filed a joint tax return and you have tax liabilities due to the actions of a spouse or ex-spouse, you may qualify for Innocent Spouse Relief.
• Temporary Collection Delay. If the IRS concludes that you have no way to pay your taxes you may qualify for a temporary collection delay. You will still owe the amount and it will incur interest. If your financial situation improves you will have to pay.

They apply to limited numbers of people but you should still be aware of them, because one of them could apply to you!

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

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, you could face rejection or delays. You may wish to consider professional help.

Say, for instance, you owe the IRS $32,000 or $43,000 and submit an Offer in Compromise…  

Other than needing to make sure all the math is right and all fields are filled out properly on Form 433, 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, but 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 amount of IRS documentation 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 up front. 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.

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 $26,000 to $50,000 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

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