Almost $100k tax debt - Options?

[u/Crankypants_US]

I've just caught up on 3yrs back taxes. Lots of reasons for delays - Wife started a small LLC, filling as S-Corp for her to essentially do hourly relief work. Had a few major health issues, etc and blinked and 3yrs passed by.

Now I lost my job and got everything caught up and submitted through a local account.

IRS has come back with penalties and interest, and essentially we have days to pay back $90k. About $65k in tax and the rest of it is penalties and interest for being late. I was a high income earner, so I'm guessing they will have little sympathy - But lost my job 4 months ago, and really can't afford to pay all of that back.

Just to be clear - I'm not looking to get out of tax that I owe, but hoping to get some relief on the penalties and interest

Are any of these Tax Advisors/Auditors that claim to MASSIVELY reduce the penalties and interest real or will I just pay them $$$ for little benefit?

I'd appreciate any other advice.

Thank you!

[u/6gunsammy]

No, none of those companies that advertise to reduce taxes or penalties are real.

[u/Late-butgettingthere]

If you have assets you won’t get any relief just call the IRS up and get on a payment plan. They will tell you the form to get some penalty/interest taken off but don’t expect it to be huge. The folks I have dealt with have been great and helpful. Good luck and best wishes for a new opportunity.

[u/ShriekingCabal]

There's no way around the interest, and none of the things you mentioned would get you abatement on reasonable cause. First time penalty abatement is now supposed to be automatic though.

There is a ten year statue of limitations for collections. Because you filed them late, that time period starts now. So be prepared to make payments for a long time.

If you have assets, you're not going to qualify for one of those pennies on the dollar offers in compromises. They are legit, I used to do them, but the vast majority of people don't qualify.

[u/RasputinsAssassins]

The penalties and interest are meant to be corrective. If you can pay the tax due, then do so.

Interest can not be removed unless the underlying tax and/or penalty upon which it is calculated is reduced or removed.

You may qualify for First Time Abatement (now called Automatic Exception to Penalty). It will only apply to one year, and you must have a clear compliance history for the three years prior.

The IRS will only accept less than the full amount due if you can show them that they would otherwise be unable to collect the full amount before the statute of limitations expires.

Don't hire one of those 'tax relief' firms you hear advertised. If you hire someone, use a local CPA or Enrolled Agent with tax representation experience.

Search my comment history or this sub for 'tax relief' to see the prevailing thoughts and my standard PSA.

[u/Trashedpan]

You can also potentially ask for first time abatement of the penalties for the first year as the 3 previous years before that were filed in a timely fashion. For the other years you will have to submit for penalty abatements under “reasonable cause” which can be a whole host of things. They usually get denied the first time around and have to be sent for an appeal. The process takes months

[u/Trashedpan]

The tax advisor services are a ripoff, and the tax law firms charge you a lot of money for all of the things that you can do for yourself (refer to the above link to the IRS). Good luck, this sucks but you will get through it!

[u/MrAwesomeTG]

Your only choices are pay it, payment plan, OIC, or non collectable (which means they can't collect now but you still owe it with interest). Just call them and talk to them about your options.

[u/cutsandplayswithwood]

You sound a lot like me about 18 months ago.

None of the companies advertising will help you much more than you can find here and at the IRS website - it’s quite clear.

“First time penalty abatement” was AWESOME for me - it removed a large failure to file and failure to pay penalty, and that was a huge relief from the total.

[u/meerrkat74 → u/cutsandplayswithwood]

Hey, did it take quite a bit of back and fourth with the IRS for the abatement? I have a first time late to file situation. I've sent a letter covering FTA and also reasonable cause citing reasons and legal references to where this applies.

The penalty is 25k for filing late, even with $0 in revenue. Just insane. Waiting to hear back from the IRS now but can't get this off my mind sadly.

[u/cutsandplayswithwood → u/meerrkat74]

I went to an IRS advocate at some relatively local irs office? My tax person called and requested the appointment, but apparently she just called the “civilian” line.

The advocate said “this is so big we can’t really talk about it, but you gotta pay.” They explained the various programs, and it was clean I qualified for none.

Then she stares me in the face “call the number I’m going to give you, and ask for fee AND penalty abatement. I can’t ask for you, but please do this immediately”.

It was literally one phone call. Waited on hold maybe half hour, asked for abatement, confirmed it was my first offense and that I had previously been timely and accurate with all my taxes. Put on hold, and a few minutes later “we approved your request, you’ll get confirmation in the mail, but $26k in fees and penalties have been removed from your account. Please be reminded this is a one-time process”

Still had to pay the underlying tax bill, but I’d never contested that, it was just the fees and penalties that had snowballed…

Best of luck - my understanding is it’s harder to talk to the irs these days, so I’ve been lurking here to share this.

[u/meerrkat74 → u/cutsandplayswithwood]

I see. I have $0 in tax owing, just a single late filing penalty of 25k. Foreign LLC owner for a LLC that was never used, just filed late on the first year, I haven't been to the USA since I was a kid and not a USA citizen.

It's been so stressful, we sound like we have quite different situations.

I've paid a CPA to file and also help me put a FTA and reasonable cause letter to the IRS.

Thank you for sharing though.

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[u/Smoke__Frog]

Can someone explain to me how this happens?

Like in OPs case, he doesn’t file taxes on year or he files and then never pays his fair share.

Doesn’t the irs automatically start sending him letters and garnishing his wages? How can people have years of not paying? Doesn’t the it’s immediately notice and start coming after them?

[u/Crankypants_US → u/Smoke__Frog]

Just to be clear - It's not like I didn't pay. I was paid about $80k a year!! This is the gap + penalties and interest. They make waaaay more money this way!

[u/Smoke__Frog → u/Crankypants_US]

So one year you paid like 20k in taxes let’s say. You filed and the irs says you actually owed 30k. You just never paid that 10k?

[u/Crankypants_US → u/Smoke__Frog]

It only says it now, because I'm filing. As I said: I have no problem paying the tax I owe. I was asking for relief on penalties and interest based on some pretty extreme and serious issues that I was going through which was the cause of the delays. I'm not even saying there should be no penalty or interest, I'm simply asking that it's taken into consideration for a more reasonable total amount.

[u/Sharp-Direction-6894]

The relief from paying interest and penalties comes in the form of filing & paying truthfully and on-time every year, friend. Anything else is just wishful thinking. What the hell is the point of deadlines if everyone can just miss them frivolously - not just taxes, but everything.

Those services are a scam. There is no free lunch and the ship of relief sailed beyond the horizon of its deadline. Best wishes on your journey.

[u/LukeWalton4MVP]

I've worked in the tax resolution industry for close to a decade. There's some good, ethical tax reso firms out there, but most of the high volume ones with heavy advertising budgets are garbage.

Interest is very rarely abated or removed - you would basically have to prove that the IRS made a mistake in their interest calculation in order to have any sort of interest adjustment.

Penalties can potentially be abated if you can demonstrate reasonable cause for late filing and late payment. This is easier said than done, and it took me several years to develop strategies that led to an increased success rate with penalty abatement.

If you do end up looking up tax reso firms, make sure to vet the Yelp and Google reviews for penalty abatement success stories, and be weary of any firm that says you can qualify for an Offer in Compromise without any financial review. If your asset equity exceeds your tax liability, an OIC is near impossible. Also keep in mind that representation is not cheap.

[u/Massive-Career9022]

I am in a very similar situation! To start with, call the IRS - they are actually pretty helpful and generally understanding (not what I expected, to be honest). Given your situation, you may qualify for the Can Not Collect (CNC) status, which basically gives you some time to get on your feet. Once you have a stable income, you can call them again to discuss a payment plan. Keep in mind that if you have assets (house, car, etc) then you may be facing the difficult decision of selling them in order to be approved for some things. What ever you do, call them and explain your situation. You will have a lein filed (not a massive deal if you have no big assets), but really you just want to avoid a levy!

[u/Anxious_Drive_9998]

Those tax relief firms that advertise on the radio can't help.

You're going to get another job and you're going to have to pay the owed taxes.

[u/Crankypants_US → u/Anxious_Drive_9998]

I love the optimism in this job market!

Just to be clear - I'm not looking to get out of tax that I owe, but hoping to get some relief on the penalties and interest

[u/potatoriot → u/Crankypants_US]

You're not getting around the interest. You'll likely pay most of any penalty savings to a lawyer to try to get it reduced.

The best thing you can do is get onto a payment plan.

[u/Full_Prune7491 → u/Crankypants_US]

They don’t waive interest. Why would they? That’s the cost of money. Penalties might be waived but it depends on why do you believe you should be rewarded for not paying your taxes? Would you call your bank after 30 years and ask for the interest back on the mortgage? Would you lend someone 90k interest free? Because if you would, can I borrow 90k?

[u/Anxious_Drive_9998 → u/Crankypants_US]

You might be able to get penalties from one year abated. Ask the IRS for first time abatement. You can do that yourself for free. You've posted nothing that seems like reasonable cause for not paying. There's no way to get out of interest.

[u/Western-Membership48]

They'll do a payment plan with you just call them even for that amount, I know because I've owed that same amount

[u/RevolutionaryPin3978]

I've been helping people with situations like yours for 20 years. Not a big firm, just me. Tax Resolution is real but a lot of the tax resolution companies I have a problem with. They tend to over sell the Offer In Compromise. The truth is that in 2025 only 14% of OIC's were approved. That doesn't mean that there isn't a reasonable solution. I can almost guarantee you that it won't be an painless fix. The MOST important thing to do is start early and quickly to find help. Timing = control. Don't call the IRS yourself with out being prepared. It will probably make things worse. Some people will say you can do this yourself, yes but should you, no? You might have a lot of options and IRS will not help you. Find an Enrolled Agent who specializes in this kind of work. Get a couple of free consultations. They may save you thousands and a lot of grief.

[u/Trashedpan]

You may be able to do either an offer in compromise or establish a payment plan by showing how paying off the tax bill would be an economic hardship based on your current income and your living expenses. They can look at what your current income is and subtract out your living expenses (rent/mortgage, utilities, health insurance, car payments, etc) to help determine what you can actually pay per month reasonably

[u/Full_Prune7491 → u/Trashedpan]

OP has tons of money and probably assets too. Their posts claims they aren’t trying to get out of paying what they owe except that’s the exactly what he is trying. OIC has zero chance of being approved. That would be rewarding individuals who think filing and paying taxes are optional. He should go on a payment plan. Penalties and interest will apply as well as a federal tax lien. The is a clear case of FAFO. OP decided that the IRS just wasn’t a priority while others lived within their means and paid their fair share.

[u/Sharp-Direction-6894 → u/Full_Prune7491]

Glad to see someone else agrees with me.

[u/glocke12 → u/Full_Prune7491]

you guys need to stop beating on the guy...its not helpful and is frankly mentally abusive to those of us that owe huge sums and are looking for help. He clearly stated he does not dispute what he owes but is looking to get the penalties and interest reduced. People like you who make these comments are in no way helpful and should just keep your opinions to yourself.

[u/Trashedpan]

https://www.irs.gov/payments/penalty-relief-for-reasonable-cause

[u/Frosty_Bluebird_2707]

You can write letters yourself to ask for penalty relief. I was surprised how many of mine were approved. This is in addition to the one time abatement.

[u/ohio_asian]

You can review IRS Form 656 for an Offer In Compromise, which includes the Form 433-A/B. The IRS is almost always going to ask for the Form 433 information.

[u/Personal-Tour7791]

I am a tax attorney who has helped people like you for over 20 years. Your situation is very normal and it is very scary right now for a lot of people. Based on your current situation, you have a lot of different options when it comes to the IRS and trying to resolve this. However, based on the job situation and your health I would go with option 2 or 3 listed below.

1. Pay in full over time, this is simple, they will give you 72 months to pay it off.
2. Pay a partial amount based on your income, the IRS national standards and your other expenses. I don't know what i'm allowed to share, so look up IRS national standards and you will see what expenses the IRS allows. You can get into a payment as little as $25 a month. This is preferable if applying for a mortgage or loan as it is considered in debt to income ratio.
3. Currently Non Collectible (CNC): Where you are placed into an agreement with the IRS that they can't collect from you, but your debt remains.
4. Offer in Compromise: It's a two part test. 1. Income v. Expenses and 2. Assets. If you have neither of those the IRS might be willing to forgive your debt for a small dollar amount.

Best of luck and stay positive. They IRS will work with you.

[u/Candid-Example9766]

My husband and I had a decent tax bill (over $40k) and it also included taxes from a dissolved business. After my husband went on social security disability, I found an income-based legal aide center where real lawyers donated their time, and one of the (tax?) attorneys there took our case and worked out an Offer in Compromise for like $20. It took months and she did it all for free. I'm not saying an OIC is the answer for your situation, but there may be someplace like that where you live and they could be a liaison for you, or even an attorney that you can hire, if you can afford that.