How to Apply for Debt Forgiveness to the IRS

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IRS debt can be hard to get rid of. Generally, the government will do what is necessary to get its money eventually. According to the Internal Revenue Service website, the IRS may garnish your bank account or wages and even place a lien on your property for unpaid taxes. For those who truly cannot pay their debt due to financial circumstances, the IRS may defer or forgive your debt through an Offer in Compromise.

Step 1

Fill out Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals). This form will help the IRS and you determine what resources you do or don't have to pay your debt. This is known as your Reasonable Collection Potential. Be sure to include any required attachments, including your last tax return and proof of expenses.

Step 2

Fill out Form 656 (Offer in Compromise) to propose your offer to the IRS. According to the DR Sullivan & Company website, the amount you offer the IRS must be equal to your Reasonable Collection Potential, if not more. So, you cannot have your debt completely forgiven unless your Reasonable Collection Potential is $0.

Step 3

Send both forms to the IRS and wait for a response to your offer. According to the DR Sullivan & Company website, your offer may be rejected if you submit an offer that is too close to a previously rejected offer, you are in bankruptcy, you are in default on past years' taxes, you can clearly pay more than you have offered and haven't informed the IRS of any special circumstances, or you send in your Offer in Compromise after you have been notified of the IRS' intentions to garnish your bank account or pay check.

Things You'll Need

  • IRS Form 433-A

  • IRS Form 656

  • Tax return

  • Proof of expenses

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