IRS TAX DEBT RELIEF PROGRAM
What if my debt is forgiven?
The tax impact of debt forgiveness or cancellation depends on your individual facts and circumstances. Generally, if you borrow money from a commercial lender and the lender later cancels or forgives the debt, you may have to include the cancelled amount in income for tax purposes. The lender is usually required to report the amount of the canceled debt to you and the IRS on a Form 1099-C, Cancellation of Debt. There are several exceptions to the taxability of cancelled debt, such as insolvency or bankruptcy.
Coronavirus Tax Relief
We’re offering tax help for individuals, families, businesses, tax-exempt organizations and others – including health plans – affected by coronavirus.
Child Tax Credit
The 2021 Child Tax Credit is up to $3,600 for each qualifying child.
Eligible families, including families in Puerto Rico, who don’t owe taxes to the IRS can claim the credit through April 15, 2025, by filing a federal tax return—even if they don’t normally file and have little or no income.
Hiring someone to help with your tax return? Be sure to seekreputable tax assistance. Be wary of preparers who promise a larger refund, base their fees on a percentage of the refund, or promise other too-good-to-be-true outcomes.
See theAdvance Child Tax Credit 2021webpage for the most up-to-date information about the credit and filing information. Families in Puerto Rico can check eligibility rules and find more information atResources and Guidance for Puerto Rico families that may qualify for the Child Tax Credit.
IRS Mission-Critical Functions Continue
We continue to process returns and issue refunds, and we are making progress. Get up-to-date status on affectedIRS operations and services.
Economic Impact Payments
The IRS has issued all first, second and third Economic Impact Payments.
Most eligible people already received their Economic Impact Payments. People who are missing stimulus payments should review the information on theRecovery Rebate Creditpage to determine their eligibility to claim the credit for tax year 2020 or 2021.
Securely access yourIRS online accountto view the total of your first, second and third Economic Impact Payment amounts under the Tax Records page. You can no longer use the Get My Payment application to check your payment status.
Latest Updates on Coronavirus Tax Relief
Penalty relief for certain 2019 and 2020 returns
To help struggling taxpayers affected by the COVID-19 pandemic, the IRS issuedNotice 2022-36PDF, which provides penalty relief to most people and businesses who file certain 2019 or 2020 returns late. The IRS is also taking an additional step to help those who paid these penalties already. To qualify for this relief, eligible tax returns must be filed on or before September 30, 2022. See thisIRS news releasefor more information on this relief.
American Rescue Plan Act of 2021
See thisIRS news releasefor more information on individual tax provisions of the American Rescue Plan Act of 2021, signed into law on March 11, 2021. The legislation also made changes totax relief for employers. Continue to check back for updates.
Employer Tax Credits
Many businesses that have been severely impacted by coronavirus (COVID-19) qualify for employer tax credits – the Credit for Sick and Family Leave, the Employee Retention Credit, and Paid Leave Credit for Vaccines.
Offer in Compromise
An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can’t pay your full tax liability or doing so creates a financial hardship. We consider your unique set of facts and circumstances:
- Ability to pay
- Income
- Expenses
- Asset equity
We generally approve an offer in compromise when the amount you offer represents the most we can expect to collect within a reasonable period of time. Explore all other payment options before you submit an offer in compromise. The Offer in Compromise program is not for everyone. If you hire a tax professional to help you file an offer, be sure to check his or her qualifications.
Who Is Eligible
Confirm you’re eligible and prepare a preliminary proposal with theOffer in Compromise Pre-Qualifier Tool.
You’re eligible to apply for an Offer in Compromise if you:
- Filed all required tax returns and made all required estimated payments
- Aren’t in an open bankruptcy proceeding
- Have a valid extension for a current year return (if applying for the current year)
- Are an employer and made tax deposits for the current and past 2 quarters before you apply
If You Apply and Are Not Eligible
If you apply for an Offer in Compromise and we can’t process your offer, we’ll:
- Return your application and offer application fee
- Apply any offer payment you included to your balance due
Submit Your Application
Find forms to submit an application and step-by-step instructions inForm 656-B, Offer in Compromise BookletPDF.
Complete an application package:
- Form 433-A (OIC) (individuals) or 433-B (OIC) (businesses) and all required documentation as specified on the forms
- Form 656(s) – you must submit individual and business tax debt (Corporation/ LLC/ Partnership) on separate Forms 656
- $205 application fee (non-refundable)
- Initial payment (non-refundable) for each Form 656.
Select a Payment Option
Your initial payment varies based on your offer and the payment option you choose:
- Lump Sum Cash:Submit an initial payment of 20% of the total offer amount with your application. If we accept your offer, you’ll receive written confirmation. You must pay any remaining balance due on the offer in five or fewer payments.
- Periodic Payment:Submit your initial payment with your application. Continue to pay the remaining balance in monthly installments while the IRS considers your offer. If IRS accepts your offer, continue to pay monthly until it is paid in full.
If You Meet the Low Income Certification Guidelines
You don’t have to:
- Send the application fee or the initial payment
- Make monthly installments while we review your offer.
For details, seeForm 656-B, Offer in Compromise BookletPDF.
Understand the Process
While IRS evaluates your offer:
- Your non-refundable payments and fees are applied to the tax liability (you may designate payments to a specific tax year and tax debt)
- IRS may file a Notice of Federal Tax Lien
- IRS suspends other collection activities
- Your legal assessment and collection period is extended
- You make all required payments per your offer
- You don’t have to make payments on an existing installment agreement
- Your offer is automatically accepted if the IRS doesn’t make a determination within two years of the IRS receipt date (This does not include any Appeal period.)
If Your Offer Is Accepted
- You must meet all theOffer Termslisted inSection 7of Form 656, including filing all required tax returns and making all payments
- IRS doesn’t release federal tax liens until your offer terms are satisfied
- Certain offer information is available for public review by requesting a copy of apublic inspection file.
If Your Offer Is Rejected
- You may appeal a rejection within 30 days usingRequest for Appeal of Offer in Compromise, Form 13711PDF.
- The IRS Independent Office of Appeals offersadditional assistance on appealing your rejected offer.
