IRS Tax Relief Programs at a Glance
Each program fits a different situation.
| Program | Consider it if |
|---|---|
| Payment plan | You can pay, just not all at once |
| Offer in Compromise | Paying in full isn’t possible or would cause financial hardship |
| Penalty relief | You have a clean record or a good reason for falling behind |
| Temporary delay of collection | Paying would leave you unable to cover basic living expenses |
| Innocent spouse relief | Errors you didn’t know about on a joint return understated your tax |
IRS Payment Plans (Installment Agreements)
An installment agreement is an arrangement to pay what you owe in smaller amounts over time. The IRS offers short-term and long-term payment plans.
Short-Term Payment Plan
- You owe less than $100,000, including penalties and interest, and can pay in full within 180 days.
- There’s no setup fee.
Long-Term Payment Plan
- You can generally apply online if you owe $50,000 or less and have filed all required returns.
- You make monthly payments.
- A setup fee may apply depending on how you apply and pay. Applying online with direct debit costs the least.
- Low-income taxpayers may have fees waived or reimbursed.
Interest and Penalties on a Payment Plan
A penalty is an extra charge the IRS adds when you file or pay late. With either plan, interest and penalties keep adding up until you pay in full.
The failure-to-pay penalty is generally 0.5% of your unpaid tax per month. If you filed on time as an individual taxpayer, it generally drops to 0.25% per month while your approved plan is in effect. For a step-by-step look, read How does an IRS payment plan work?
Offer in Compromise
An Offer in Compromise (OIC) is an agreement to settle your tax debt for less than the full amount owed. It’s meant for people who can’t pay in full or for whom paying would cause financial hardship.
To assess your ability to pay, the IRS reviews your income and expenses. It also weighs your asset equity (what your property is worth minus what you owe on it).
Individuals can apply through their IRS online account. Businesses and individuals without an account use the Form 656-B booklet, which includes Form 656. There is a $205 application fee plus an initial payment (a lump sum or periodic payments). However, the application fee and initial payment can be waived if you meet the low-income qualifications.
To be eligible for an OIC, you must meet the following requirements:
- Have filed all required tax returns
- Made required estimated tax payments
- Not be in an open bankruptcy
If the IRS rejects your offer, it doesn’t return the application fee, and your payments will go toward your balance. If the IRS returns your application because you aren’t eligible, it refunds the application fee.
Penalty Relief (Abatement)
Abatement means the IRS removes penalties it has charged. Penalty relief doesn’t remove the underlying tax, so you still owe the original balance.
| Type | Who generally qualifies |
|---|---|
| Automatic Exemption from Penalty (AEP) | You filed or paid late on a 2025 or later tax return, but you filed on time and paid what you owed for the three prior years. The IRS applies this automatically. |
| First-time abatement | You have a history of timely compliance, but the penalty is for a tax year before 2025. You must contact the IRS to request a first-time abatement. |
| Reasonable cause | A good reason kept you from meeting your tax obligations. Examples on the IRS reasonable cause page include serious illness, a death in your immediate family, a natural disaster, or being unable to get your records. |
Automatic Exemption from Penalty (AEP)
The IRS is replacing first-time abatement with an automatic program. If you meet the compliance requirements, the IRS doesn’t charge the penalty in the first place.
AEP covers late-filing, late-payment, and late-deposit penalties on 2025 tax year returns and later (2026 and later for quarterly returns).
You don’t need to contact the IRS. If AEP applies, the IRS sends a letter explaining that your penalties weren’t assessed. You still owe any unpaid tax, interest, and penalties that AEP doesn’t cover.
If you get a notice showing a penalty and think you should have qualified, call the number on the notice.
Temporary Delay of Collection
If paying would leave you unable to cover basic living expenses, the IRS can temporarily pause collection. This is often called “currently not collectible” status.
You still owe the full amount, and interest and penalties keep adding up during the pause. To see how a balance can affect your refund, read Can I get a tax refund if I owe taxes?
Innocent Spouse Relief
A joint return is a single tax return a married couple files together. Innocent spouse relief may relieve you of additional tax you owe if the tax on your joint return was understated because of errors you didn’t know about.
Getting Help and Avoiding Tax Relief Scams
If you’re having trouble resolving a tax problem, the Taxpayer Advocate Service can help. It’s an independent organization within the IRS. You can call TAS at 1-877-777-4778.
Be wary of companies that guarantee big reductions in your tax debt. You can apply for the IRS programs above directly. To learn more, read What is tax debt relief, and is it legitimate?
Sources
- IRS, Payment Plans; Installment Agreements
- IRS, Offer in Compromise
- IRS, Penalty Relief
- IRS, Temporarily Delay the Collection Process
- IRS, Innocent Spouse Relief
- IRS, Failure to Pay Penalty
- IRS, Penalty Relief Due to First-Time Abate or Other Administrative Waiver
- IRS, Penalty Relief for Reasonable Cause
- Taxpayer Advocate Service, TaxpayerAdvocate.IRS.gov and Contact Us
