IRS debt can create serious financial problems for taxpayers. In addition to owing taxes, the Internal Revenue Service penalizes taxpayers who fail to submit tax returns or unable to pay the full amount owed. Penalties, late fees, and interest can cause taxpayers to owe nearly double their actual tax bill. Anyone owing money to the IRS should take immediate action to rectify the situation.

Solutions to clear IRS debt are available to those who become proactive. The IRS is usually willing to work with taxpayers who request assistance to develop a payment plan. Depending on the circumstances, the Internal Revenue Service may agree to write-off a portion of past due taxes. However, those who ignore tax collection letters not only set their self up for financial hardship, they could face tax evasion charges and sentenced to serve time in jail.

In order to resolve tax issues, taxpayers must contact the IRS taxpayer assistance center. Hours of operation and phone numbers are provided at IRS.gov. The taxpayer assistance center is open Monday through Friday between the hours of 7 a.m. to 10 p.m. Eastern Standard Time.

Taxpayers who owe less than $25,000 can establish a payment plan at the IRS website. Individuals are required to submit Form 9465 taxpayer installment agreement request which must be approved by the IRS. Upon approval, taxpayers select their payment option.

Presently, the IRS allows taxpayers to pay outstanding IRS debt in monthly installments; via a short term extension which requires tax debt to be paid within 90 days; or pay outstanding taxes in full. Individuals are required to pay a user fee to establish a payment plan. Currently, the user fee is $105. If taxpayers establish a direct deposit account, the IRS reduces the user fee to $52.

In order to establish a payment plan, taxpayers are required to file all past due returns. Taxpayers are charged a failure-to-pay penalty of 5-percent for each month the return is delinquent. The maximum penalty assessed is 25-percent.

Taxpayers who file tax returns on time, but fail to pay taxes by the deadline are charged a failure-to-pay penalty of 1/2-percent. This penalty is assessed from the original filing date and continues until outstanding taxes are paid in full.

Individuals owing more than $10,000 in IRS debt should consult with a tax lawyer to determine available options. Under certain circumstances the Internal Revenue Service will accept a partial payment installment agreement. Under this agreement, the IRS forgives a percentage of past due taxes. Taxpayers are required to submit monthly payments until the agreed upon tax amount is paid.

Taxpayers who are financially incapable of paying IRS debt in full may qualify for an Offer in Compromise agreement. Using this tax relief option, the Internal Revenue Service agrees to accept less than the full amount owed.

The IRS only considers Offer in Compromise when no other options exist to cure tax debt. Using offer in compromise, taxpayers are required to enter into a contractual agreement to pay an established amount. Payments are submitted on a monthly basis until the agreed upon amount is fully paid. Taxpayers agree to allow the IRS to retain future tax refunds which are credited toward the back taxes. Once taxes are paid, taxpayers will be able to claim refunds.

Homeowners who lose their property to foreclosure may qualify for tax relief remedies under the Mortgage Forgiveness Debt Relief Act. Property owners are allowed to claim forgiven debt obtained through foreclosure or mortgage refinance of their personal residence.

Individuals and business owners who file bankruptcy may qualify for tax relief under IRS908 bankruptcy tax codes. Debt discharged through bankruptcy is a complicated issue which should be handled by a certified public accountant or tax attorney.