About the Federal Tax Relief Plan

Automatic Extensions

• As long as you file Form 4868 with the IRS by April 15 of the year following the year for which the tax in question is due, you will be granted an automatic six-month filing and payment extension with no questions asked. This will relieve you of both "failure to pay" penalties and "failure to file" penalties, as long as you file and pay by October 15.
  
  

Penalty Waivers

• If you are delinquent on your taxes and can pay your underlying tax debt but wish to avoid already-assessed late penalties and interest, you may petition the IRS for a waiver of these penalties. A waiver will only be granted if you can demonstrate "reasonable cause" for your delinquency. While simple lack of money to pay is never considered a valid excuse, an untimely death in your immediate family or a natural disaster in your area might qualify.
  
  

Payment by Installments

• The IRS will generally agree to payment by installments for taxpayers owing no more than $25,000, including interest and penalties. Although this will not stop interest and penalties from continuing to accrue, it will stop the IRS from instituting collection activities against you, as long as you keep current on your payments. Taxpayers owing more than $25,000 may sometimes be allowed to pay in installments, but will have to provide the IRS with significant details regarding their financial status.
  
  

Uncollectible Status

• Uncollectible status is designed for taxpayers who are experiencing temporary financial difficulties, cannot pay in installments, expect to someday be able to pay their delinquent tax debt, and need some time to recover their ability to pay. The IRS will suspend collection activity for a specified period, although interest and penalties will continue to accrue. The ideal candidate for uncollectible status is a taxpayer who operates a small business and needs the IRS to refrain from executing on his business assets so that he can bring his business back to profitability in order to pay the tax.
  
  

Offers in Compromise

• An Offer in Compromise usually represents a last-ditch attempt to collect at least some money from a delinquent taxpayer who the IRS believes will never be able to pay their full tax debt. Other reasons why the IRS might make this offer include cases where the legitimacy of the taxpayer's tax debt is in question (the IRS made a mistake, for example), or where the taxpayer or the taxpayer's dependent would suffer extraordinary hardship if collection activity were commenced.