The world of tax debt is full of confusing terms and industry lingo. It’s hard to know what the IRS really offers versus what some companies claim. At TLA we believe in clarity and transparency. 

This glossary is here to cut through the confusion and explain IRS tax relief programs and common tax terms in plain English.

Tax Relief Marketing: Industry Terms vs. Actual IRS Programs

One of the biggest challenges for taxpayers is understanding the language used in the tax relief industry. You may hear phrases like “Tax Forgiveness” or “Hardship Program” but it’s important to know what that means within the IRS’s legal framework. 

Below is a table of common marketing phrases and their actual IRS program counterparts.

Marketing Term You Might Hear Actual IRS Program or Status What It Really Means
IRS Fresh Start Program A collection of IRS initiatives, including Streamlined Installment Agreements, Penalty Abatement, and revised Offer in Compromise guidelines. Not a single program, but a set of updated rules making it easier for taxpayers to qualify for existing relief options.
Tax Forgiveness Program Offer in Compromise (OIC) A program that allows you to settle your tax debt for less than the full amount owed if you can prove you cannot pay the full balance now or in the foreseeable future. It is not automatic forgiveness.
Hardship Program Currently Not Collectible (CNC) Status A temporary status where the IRS agrees to pause collection activities (like levies and garnishments) because paying the debt would cause financial hardship. The debt still exists and accrues interest.
Tax Settlement Offer in Compromise (OIC) or Partial Pay Installment Agreement A broad term usually referring to settling for less via an OIC or, in some cases, an installment agreement where you pay only a portion over time if the collection statute is near expiration.
Stop IRS Wage Garnishment Collection Due Process (CDP) Hearing or achieving an Installment Agreement or CNC Status A result of successfully applying for a relief program that, once accepted, requires the IRS to release active levies and garnishments.

 

IRS Tax Relief Programs Explained

Now let’s get into the details of the most common and important IRS programs and tax terms you need to know.

Offer in Compromise (OIC)

An Offer in Compromise (OIC) is an agreement between you and the IRS where you settle your tax debt for less than the full amount you owe. The IRS will only accept an OIC if it believes it can’t collect the full debt within a reasonable period of time.

Q: Who qualifies for an Offer in Compromise?
A: Qualification is strict. The IRS will accept an OIC based on one of three grounds:

  1. Doubt as to Collectibility: There is significant evidence you could never pay the full debt even with a payment plan.
  2. Doubt as to Liability: There is genuine doubt the assessed tax debt is correct.
  3. Effective Tax Administration: While the debt is correct and collectible, paying it in full would create an economic hardship or would be unfair for another compelling reason.

The IRS uses a complex formula based on your income, necessary living expenses and equity in assets to determine an acceptable offer amount. It’s a very intensive process that requires full financial disclosure.

Installment Agreement

An Installment Agreement is a monthly payment plan with the IRS to pay off your tax debt over time.

Q: What types of Installment Agreements are available?
A: The IRS offers several types depending on the amount you owe:

  • Guaranteed Installment Agreement: Available if you owe $10,000 or less and meet certain other criteria.
  • Streamlined Installment Agreement: For individuals who owe $50,000 or less ($25,000 for businesses). This allows for a setup without requiring a detailed financial statement in most cases.
  • Partial Pay Installment Agreement: A plan where you pay less than the full balance owed each month but the debt is not settled. The IRS will only agree if your monthly payment is the maximum you can afford and they will review your financial situation periodically.
  • Non-Streamlined Installment Agreement: For debts over $50,000, this requires a full financial disclosure (Collection Information Statement) to determine the payment amount.

Currently Not Collectible (CNC) Currently Not Collectible (CNC)

Currently Not Collectible (CNC) is a hardship status. If the IRS determines you are unable to pay your tax debt and cover your necessary living expenses, they may grant CNC status. This stops all collection activity, including levies and garnishments, for a one-to-two year period.

Q: Does CNC status make my debt go away?
A: No. While the IRS stops active collection, your tax debt will continue to grow with interest and some penalties. The IRS will review your financial situation annually. If your financial condition improves, they will remove the CNC status and expect you to resume payments. The debt will only expire once the 10-year Collection Statute of Limitations passes.

Penalty Abatement

Penalty Abatement is the process of asking the IRS to remove (or “abate”) penalties that have been assessed against you. The most common is the First-Time Abatement (FTA) waiver, which is a one-time pass for taxpayers with a good compliance history.

Q: What penalties can be abated?
A: You can request abatement for Failure to File, Failure to Pay and Failure to Deposit penalties. To qualify you typically need to show you had “reasonable cause” for your failure, such as a fire, natural disaster, death in the immediate family or unavoidable absence. The FTA waiver does not require reasonable cause if you have been penalty-free for the previous three years.

Innocent Spouse Relief

Innocent Spouse Relief allows a spouse to be relieved of responsibility for paying tax, interest and penalties on a joint return for which the other (or former) spouse should be solely responsible.

Q: Who is eligible for Innocent Spouse Relief?
A: You must meet all of the following conditions:

  • You filed a joint return.
  • There is an understatement of tax on the return that is solely attributable to your spouse’s erroneous item (e.g. unreported income or an incorrect deduction).
  • You can prove at the time you signed the joint return you did not know and had no reason to know there was an understatement of tax.
  • It would be unfair to hold you liable for the tax given all the facts and circumstances.

IRS Levy

A levy is the legal seizure of your property to satisfy a tax debt. It is an enforced collection action.

Q: What can the IRS levy?
A: The IRS can levy assets such as:* Wages, salary, or commissions (Wage Garnishment)

  • Money in your bank or financial accounts
  • State tax refunds
  • Social Security benefits
  • Your vehicle, real estate, or other personal property

Q: How do I stop a levy?
A: To get a levy released you must pay the debt in full, set up an Installment Agreement, go CNC, or have an OIC accepted.

Lien

A federal tax lien is the government’s claim against your property when you don’t pay or can’t pay a tax debt. It’s different from a levy because it’s a claim to your property as security for the debt, not the actual seizure of it.

Q: What happens with a lien?
A: A lien attaches to all your current and future property, including real estate, vehicles and business assets. It can hurt your credit score and make it hard to sell property or get loans. To get a lien released you must pay the debt in full. Once paid the IRS will release the lien within 30 days.

CDP Hearing

A Collection Due Process (CDP) Hearing is a formal appeal you can request if you get a Notice of Federal Tax Lien Filing or a Final Notice of Intent to Levy. It’s your right to appeal these actions.

Q: What happens at a CDP Hearing?
A: During the hearing, which is conducted by the independent IRS Office of Appeals, you can dispute the debt, propose an alternative payment method (like an Installment Agreement or OIC) or argue the collection would cause a significant economic hardship. Requesting a CDP hearing will suspend collection activity until the appeal is decided.

Statute of Limitations

The Statute of Limitations is the time the IRS has to collect a tax debt. Generally the IRS has 10 years from the date the tax was assessed to collect the debt.

Q: Can the 10-year period be extended?
A: Yes. Certain actions can “toll” or pause the clock, such as filing for bankruptcy, submitting an OIC, requesting a CDP Hearing or if you’re outside the U.S. for a continuous period of at least 6 months.

Tax Relief FAQs

Can I negotiate my tax debt with the IRS myself?

Yes, you can. The IRS has processes in place for taxpayers to represent themselves. However, the negotiation process can be complex, time consuming and requires a strong understanding of tax law and procedure. 

Many individuals choose to hire a qualified tax professional, such as an Enrolled Agent, CPA or tax attorney to represent them and protect their rights. If you’re considering professional help, we’re here to guide you.

What’s the difference between tax avoidance and tax evasion?


This is a big distinction.

  • Tax Avoidance: This is the legal use of the tax code to minimize your tax liability. Examples include claiming legitimate deductions, contributing to a retirement account or using tax credits. Tax avoidance is legal and smart financial planning.
  • Tax Evasion: This is the illegal act of not paying taxes you owe. This includes underreporting income, inflating deductions or hiding money in offshore accounts. Tax evasion is a felony with severe penalties including fines and imprisonment.

What are my rights as a taxpayer?


You have fundamental rights, known as the Taxpayer Bill of Rights, when dealing with the IRS. These include:

  1. The Right to Be Informed
  2. The Right to Quality Service
  3. The Right to Pay No More than the Correct Amount of Tax
  4. The Right to Challenge the IRS’s Position and Be Heard
  5. The Right to Appeal an IRS Decision in an Independent Forum
  6. The Right to Finality
  7. The Right to Privacy
  8. The Right to Confidentiality
  9. The Right to Retain Representation
  10. The Right to a Fair and Just Tax System

Every IRS employee is required to respect and protect these rights.

How do I know if a tax relief company is reputable?


Be wary of companies that:

  • Guarantee they can settle your debts for “pennies on the dollar” before reviewing your financial situation.
  • Charge high upfront fees before doing any work.
  • Pressure you to make a quick decision.
  • Claim they can stop all IRS action immediately. 

A reputable firm will be transparent about fees, explain the realistic outcomes based on your specific situation and will be clear that all programs are administered by the IRS, not by them. We believe in this transparent approach. 

Contact us for a confidential, no obligation consultation to discuss your real options.

Disclaimer: This information is for general and educational purposes only and is not legal or tax advice. Tax laws and IRS programs change. Consult a tax professional. TLA is FTC and BBB compliant and practices transparent marketing.