How to Settle Tax Debt With the IRS By Yourself: A Complete Guide

Owing money to the Internal Revenue Service (IRS) can be scary, and you may be worried about liens or garnishments. You’re not alone, though; two in five Americans have faced or are currently facing penalties and fees because of tax debt.

IRS debt settlement can offer a way out of a tough situation. When you settle with the IRS, you pay less than what you owe to resolve the debt. Here’s how to settle with the IRS by yourself, along with tips on when to call in a tax relief expert.

Table of Contents

1. Can you settle with the IRS yourself?
2. DIY vs. professional
3. How to settle with the IRS
   1. 1: Review IRS notice
   2. 2: Verify balance
   3. 3: Determine settlement eligibility
   4. Step 4: Gather paperwork
   5. Step 5: Complete OIC application
4. If the IRS accepts your settlement
5. What if the IRS denies your settlement?
6. How to choose a tax debt relief company

Can you settle with the IRS yourself?

Yes, you can settle IRS debts yourself. During the 2024 tax year, the IRS accepted 7,199 settlement offers from taxpayers, totaling $163.4 million. While the IRS doesn’t specify how many settlements were reached without third-party help, it’s safe to assume many taxpayers handle IRS debt settlement solo. 

You don’t need an attorney or any other professional representation to negotiate a settlement agreement. The only thing you need when settling with the IRS if you can’t pay your taxes in full is a plan.

Now, here’s the real question. Should you attempt to settle with the IRS on your own or get help?

DIY tax debt settlement vs. professional tax relief

Settling with the IRS generally means asking the government to accept less than what you owe for a tax debt. The technical name for this agreement is an Offer In Compromise (OIC). You’ll need to apply for an OIC with the IRS, which involves submitting a proposed settlement amount and paying a fee.

Whether you should do this yourself or work with a tax relief company may depend on how much you owe and your comfort level with negotiating.

In my experience, the biggest mistake people make when trying to settle IRS tax debt on their own is contacting the IRS without fully understanding their financial situation.

Many individuals can work directly with the IRS without hiring an attorney, but success depends on preparation. Before reaching out, you need to know exactly how much you owe, what you can realistically afford, how other debts factor in, and which IRS settlement options you may qualify for. Without that groundwork, it’s easy to make costly missteps.

DIY debt settlement

DIY debt settlement generally works like this:

1. You make a settlement offer to the IRS.
2. If the IRS accepts, you arrange to pay the settlement amount.
3. Once paid, the remaining tax debt is forgiven.

Here are the benefits and drawbacks.

Pros

• You may be able to negotiate significant savings

  This will reduce a large chunk of what you owe.

• You can apply online

  You don’t need to visit an IRS office or meet with an IRS agent.

Cons

• The application can feel complicated

• You’ll pay a fee to submit your offer

  However, low-income filers may qualify for a waiver.

• Long wait for a decision

  It typically takes six to 12 months.

• Errors on application could result in denial

  The IRS approved less than 25% of the 33,591 settlement offers it received in 2024.

When helping clients decide whether an Offer in Compromise is worth pursuing, I focus first on their full financial picture and long-term affordability.

An Offer in Compromise isn’t always the best or fastest solution. Clients should compare all available IRS options, including payment plans, and determine which approach resolves the debt most efficiently without creating additional financial strain. The right choice is the option that fits the budget, meets the goal, and has the highest likelihood of approval.

Professional tax debt settlement

Professional tax debt settlement works much the same way as the DIY method described above, with one crucial difference: Someone else negotiates with the IRS to reach an agreement on your behalf, in exchange for a fee. This is similar to how debt relief programs work to help people resolve credit cards or medical bills they can’t pay in full.

Here’s what to know about working with a pro.

Pros

• Avoid dealing with the IRS yourself

• Get a tax professional’s expertise and knowledge of the tax code

• Protection from tax collection efforts throughout the process

• Potentially better odds of getting a settlement offer approved

Cons

• Results aren’t guaranteed

• Tax relief scams could hinder your search for a reputable company

• Could cost hundreds or even thousands of dollars, depending on the complexity of your tax situation

How to settle with the IRS by yourself, step by step

Proposing a tax debt settlement is not as intimidating it sounds. It’s mostly a matter of knowing which forms you need to file, where to send them, and how to respond to the IRS’s decision. Here’s how to negotiate a settlement with the IRS, step by step.

Step 1: Review your IRS notice

If you owe taxes, you should get an official notice from the IRS by mail. The IRS does not contact taxpayers by phone, text, or email. The CP14 notice is the form the IRS uses when someone has a balance due.

Your notice will tell you:

• The original amount of tax due
• The amount of penalties and interest accrued
• Payments and credits applied to your balance
• The due date that payment is expected

Remember, until you pay your balance, interest and penalties continue to pile up. If you ignore the notice, the IRS may proceed with enforcement actions, which could include garnishing your tax refund or putting a lien on your property.

What if you think your IRS notice is wrong? You have the right to appeal. Your notice should include instructions on how to appeal, along with the due date by which you must file your appeal.

Step 2: Verify your balance

Next, compare the information on your notice to what’s listed in your IRS account online. If you don’t know how to check your tax balance online, it’s time to familiarize yourself with ID.me. This is an official identity verification service that the IRS uses to share tax details digitally.

• Head to ID.me
• Choose “Create an Account”
• Enter your email and choose a secure password
• Confirm your new account through your email
• Enable multi-factor authentication

Once logged in, you can review your account details and compare the balance due shown to the amount listed on your CP14 notice.

Step 3: Determine your eligibility for a settlement

The IRS doesn’t approve all the settlement offers it receives. Before you apply for an Offer in Compromise, it may help to know how likely you are to qualify. Generally, you’re eligible 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 two quarters before you apply.

The IRS has an Offer in Compromise Pre-Qualifier Tool you can use to gauge your eligibility. You’ll need to answer a few questions and enter information about your income, assets, expenses, and proposed offer.

Step 4: Gather your paperwork

If you’re eligible for IRS settling through an Offer in Compromise, you’ll need to complete the application and share the required documents.

The list of what you’ll need is lengthy and includes copies of:

• Your most recent pay stubs from every employer
• Your most recent investment and retirement account statements
• All documents and records showing digital assets you hold
• Your most recent statements showing other sources of income, like Social Security benefits, rental property income, dividends, child support, alimony, or royalties
• Individual complete bank statements for the three most recent months (six months if you own a business)
• Complete statements for each business bank account you own, if applicable
• Completed Form 433-B (Collection Information Statement for Businesses) if you or your spouse has an interest in a business entity other than a sole proprietorship.
• Your most recent loan statements, including mortgage and auto loans
• List of Accounts Receivable or Notes Receivable, if applicable
• Documents verifying delinquent state and local taxes, if applicable
• Court orders for child support/alimony payments that you claim as a monthly expense
• Trust documents, if applicable

If you would like an attorney, CPA, or enrolled agent to represent you during the settlement process, you’ll also need an up-to-date power of attorney document.

Step 5: Complete the Offer in Compromise application

Form 656 is the official booklet the IRS publishes that details everything you need to know to apply for an Offer in Compromise. All the forms you need are here, along with instructions on how to fill them out and pay your application fee.

To apply for an IRS settlement, you will:

• Complete and sign Form 433-A(OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals, which is at the beginning of the booklet.
• Attach your required documentation, which you can find listed at the bottom of Form 433-A.
• Complete Form 656 and pay the $205 application fee.
• Make an initial payment, based on the offer you propose.

The IRS requests information about your household, employment history, income, personal assets, business assets (if applicable), business income and expenses (if applicable), and monthly household income and expenses. After you fill out these sections you’ll calculate your minimum offer amount.

Your offer amount is determined by the income and assets you entered elsewhere on the form, and a multiplier of 12 or 24. The offer must be more than $0; other than that, the IRS does not specify a minimum threshold.

• Use ’12’ for your multiplier if you plan to pay your settlement offer in one lump sum.
• Use ’24’ for the multiplier if you plan to make periodic payments toward the settlement.

For example, say you owe $50,000 in tax debt. You have $10,000 in assets, and after all your bills are paid, you have a disposable income of $200 per month. Using a multiplier of 12, your minimum offer would look like this:

$10,000 + ($200 x 12) = $12,400

If the IRS were to accept your offer, you would need to pay the $12,400 in full by the date specified in your settlement agreement. You’ll submit 20% of the amount initially with your application. If you were proposing periodic payments, you’d include the first scheduled payment.

If the IRS accepts your settlement offer

Hearing that your settlement with the IRS is approved can bring relief. Your next step is to arrange to pay the agreed-upon amount. The timeline for payment is five months for lump sum payments and six to 24 months for periodic payments.

The IRS will send a written confirmation of your offer approval that includes instructions on how and when to make the required payments. You’ll need to comply with all tax filing requirements for the next five years to avoid default on your settlement.

Why do Offers in Compromise get approved? The IRS accepts settlement offers based on one of three reasons:

1. Doubt as to liability. The IRS can accept a compromise if there’s a genuine dispute over whether the amount of debt you owe is correct, or whether you owe it at all.
2. Doubt as to collectibility. If the IRS doubts that a debt is fully collectible because you don’t have enough income or assets to pay, your compromise proposal may be accepted.
3. Effective tax administration. Under the tax code, an offer may be accepted for this reason when there’s no doubt that the tax is legally owed and that the full amount owed can be collected, but requiring payment in full would either create an economic hardship or would be unfair and inequitable because of exceptional circumstances.

If none of those reasons apply to your situation, you may need to consider other options for handling your tax debt.

What to do if the IRS denies your settlement request

If your settlement request is denied, you can appeal the decision or submit a new offer. Appeals must be submitted within 30 days; there is no waiting period to submit a new Offer in Compromise.

Should you be denied again, you could explore other options, including:

• Installment agreement. The IRS offers short- and long-term payment plans for individuals and business owners who owe back taxes. Short-term plans must be completed in 180 days or less; long-term plans may take up to 72 months.

• Penalty abatement. You may qualify for penalty relief if you tried to follow tax law but could not because of circumstances beyond your control. You’ll still need to pay your tax bill or set up an installment agreement to avoid collection actions.

• Innocent spouse relief. Sometimes, one spouse makes a mistake on a joint tax return, and the other person gets stuck with the bill. If that happens to you, the IRS may let you off the hook. You’ll need to show that you didn’t know (and had no reason to know) about the error when you signed the return. The process involves filling out a form and sharing your side of the story, but it could save you something.

• Temporary delay in collection. The IRS may list your debt as currently not collectible if you can’t afford to pay anything right now. That can give you a temporary breather to figure things out, but your debt won’t go away.

• Bankruptcy. Bankruptcy can discharge some, but not all, tax debts. You may qualify for Chapter 13 bankruptcy if you can’t pay your balance in full.

Consider consulting a professional tax relief service for advice on which option is right for you.

How to choose a tax debt relief company

Tax relief companies can help you apply for an Offer in Compromise to settle IRS tax debt, set up an installment agreement, or apply for penalty abatement. They can represent you in any interactions with the IRS, help you organize your paperwork, and navigate the appeals process if necessary.

For example, Anthem Tax Services helps individuals and businesses that owe more than $10,000 in tax debt negotiate IRS settlements. The company offers assistance with:

• Offers in Compromise
• Installment agreements
• Penalty abatement
• Tax levy protection and wage garnishment help
• Tax preparation and filing

Anthem offers a money-back guarantee if it can’t reach a reasonable solution on your behalf. A free consultation is available to help you learn more about the program.

If you’re considering working with a professional tax relief company, research the options. To find a reputable company, consider:

• The services offered (and what a tax relief company cannot do for you)
• The professional designations and credentials the company’s tax relief agents hold
• How much you’ll pay for services
• The company’s success rate and how much you might be able to settle your tax debt for

Reading online reviews can help you gauge what others are saying about a particular company.

Watch out for tax relief scams

It’s also important to read up on tax relief scams and their warning signs when selecting a company to work with. Some red flags that point to a scam include:

• Lack of transparency surrounding services or fees
• Requests or demands for payment before any services have been rendered
• Requests for payment through unusual channels, like Venmo or CashApp
• Refusal to answer your questions
• Promises or guarantees that seem too good to be true

If you believe a tax debt relief company is really a scam, you can report it to the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). In the meantime, learn more about the best tax debt relief companies to work with.