Rescue · When the balance is real
Resolution Desk & Pathfinder
Most tax help stops at the first letter. This desk starts where the letters stop: the debt is real, the exam is closed, the levy notice has a date on it — now what? There is a standing set of doors inside the IRS for exactly this moment, and they have an order. Deadlines outrank money. Enforcement outranks negotiation. And the question of whether you owe it is answered before the question of how you will pay it. The Pathfinder below walks that order with five questions; the sections under it teach each door in full. Nothing here promises an outcome — every door below is a formula, a status, or a hearing, and each one is decided by the IRS, not by us.
Education only — not personal tax advice. Personal questions route to a credentialed pro.
Figures verified against IRS sources · Tax-year tables 2016–2026 · Re-verified each season by the Update Engine · Last review: November 7, 2026
The Resolution Pathfinder
Answer as things stand today — not as you hope they will stand. The routing is rules, not vibes: the same five answers always produce the same doors, in the same order.
Your route, in order
- Installment agreement — start here. Individuals owing $50,000 or less can usually set up a streamlined agreement online — levy protection while it stays current.
- Offer in Compromise — run the formula before you commit If the monthly room you have cannot clear the balance inside the collection years left, the Offer's arithmetic — not a sales pitch — decides whether settling beats paying.
- Penalty relief Penalties are a separate, removable layer: a clean three-year record can earn First Time Abate; documented reasonable cause can remove them without it.
Education only: the Pathfinder names doors, it does not open them, and it never predicts that the IRS will accept an offer, a status, or a hearing outcome. Deadlines from real notices beat this page — if a letter in your hand has a date, the Notice Decoder computes it.
The standing options
Four doors exist for almost every balance, before bankruptcy is even a conversation. Every “tax relief” advertisement you have ever seen is a toll booth in front of one of these — all four are free to walk through yourself, and a credentialed pro can be worth their fee on the paperwork, never on the promise.
Installment agreement — pay over time
If you can pay the balance in full over time, an installment agreement is the IRS's standing answer: individuals who owe $50,000 or less in combined tax, penalties, and interest can usually get a streamlined agreement online, without financial statements, on a plan that pays the balance within 72 months. Larger balances, and businesses, document income and expenses on the Form 433 series. While an agreement is current, levy action is off the table; interest and a reduced late-payment penalty keep running, and future refunds are still offset against the balance.
Form: Form 9465, or the Online Payment Agreement at irs.gov
Authority: IRS, “Payment plans / Installment agreements”
Offer in Compromise — settle for less, by formula
An Offer in Compromise lets the IRS accept less than the full balance when the math shows it cannot reasonably collect more: the offer is built from your equity in assets plus a multiple of your future monthly income, figured on the Form 433 financial statements — it is arithmetic, not negotiation, which is why 'pennies on the dollar' advertising is a lie about a formula. The application fee is $205, a lump-sum offer must include 20% down, and a periodic-payment offer must include the first installment (low-income taxpayers are exempt from the fee and the down payments). While an offer is pending, levy is generally paused and the 10-year collection clock is suspended — one honest reason people file offers they cannot win, and one reason not to.
Form: Form 656 with Forms 433-A (OIC) / 433-B (OIC)
Authority: IRS, “Offer in Compromise”; Form 656 booklet
Currently Not Collectible — hardship pause
If collecting the balance would leave you unable to meet necessary living expenses, the IRS can mark the account Currently Not Collectible: enforced collection stops, the balance remains owed, interest and penalties keep accruing, refunds may still be offset, and the IRS reviews your income periodically and can reopen collection if it rises. CNC is a status, not a settlement — but for a household in genuine hardship it is the correct, lawful pause, and no one should be sold anything fancier while it fits.
Form: Requested by phone or through Appeals, documented on Form 433-A / 433-F
Authority: IRS, “Temporarily delay the collection process” (hardship / CNC)
Penalty relief — abatement
Penalties can be removed in two main ways: First Time Abate, an administrative waiver for taxpayers with a clean three-year compliance history facing a first failure-to-file or failure-to-pay penalty; and reasonable-cause relief, where the facts show ordinary care met events beyond your control. Requests go in writing (Form 843 for a refund of penalties already paid). Interest is a harder door: it is generally removed only when the underlying penalty is removed or the interest itself was caused by an IRS error or delay.
Form: Form 843, or a written reasonable-cause statement to the address on the notice
Authority: IRS, “Penalty relief” (First Time Abate; reasonable cause)
Bankruptcy & taxes
This decision belongs with a bankruptcy attorney — here is the map to bring them
Whether a tax debt can be discharged is arithmetic, not advocacy: three clocks, all measured backward from the day a case is filed, and a set of debts no chapter can touch. The cards below state the tests exactly as the Bankruptcy Code and Publication 908 state them, so that when you sit down with a bankruptcy attorney — the only person who should make this call with you — you arrive knowing which of your tax years are even in the conversation, and which were never going to be. Filing to discharge a tax that the tests exclude wastes the filing and the fee.
The 3-year rule — the return was due long enough ago
Measure back from the day the bankruptcy case is filed: the tax return for the debt must have been DUE — counting extensions — at least 3 years before the filing date. A 2021 return due April 18, 2022 clears this test for a bankruptcy filed after April 18, 2025. Recent tax years fail this test by definition, which is why the newest debts are the ones bankruptcy cannot touch.
Authority: 11 U.S.C. §507(a)(8)(A)(i); Pub. 908
The 2-year rule — you actually filed it, on time enough
The return must actually have been FILED at least 2 years before the bankruptcy filing. A return filed late — even one day inside the 2-year window — fails the test, and the tax for that year is not discharged. And a return the IRS prepared for you (a Substitute for Return) does not count as your filed return for this rule: a year you never filed is a year this test can never pass.
Authority: 11 U.S.C. §523(a)(1)(B); Pub. 908
The 240-day rule — the tax was assessed long enough ago
The tax must have been ASSESSED at least 240 days before the bankruptcy filing. The clock has two traps. First, it pauses — is tolled — while an Offer in Compromise was pending, plus 30 more days; a Collection Due Process request extends it as well. Second, an audit or an amended return that assesses more tax restarts the count for that additional assessment. All three tests — 3 years, 2 years, 240 days — must pass for the same tax year; passing two of three discharges nothing.
Authority: 11 U.S.C. §507(a)(8)(A)(ii); Pub. 908
Never dischargeable — the permanent set
Four categories survive any bankruptcy: (1) tax on a fraudulent return, or a tax the debtor willfully attempted to evade; (2) tax for a year with no return filed, or a return filed inside the 2-year window; (3) trust-fund and payroll taxes — the money withheld from employees' paychecks is held in trust, and the responsible person's §6672 penalty rides with it; and (4) any tax that fails one of the three tests above, which the Code treats as a priority claim. No honest advisor calls these dischargeable, whatever the advertisement says.
Authority: 11 U.S.C. §§507(a)(8), 523(a)(1); Pub. 908
Chapter 7 vs Chapter 13 — liquidation vs the plan
Chapter 7 is the short road: a discharge in a matter of months wipes out income taxes that pass all three tests, while priority and nondischargeable taxes survive to be collected afterward — and a federal tax lien on property you owned at filing generally survives with them, attaching to that property even when the personal debt is discharged. Chapter 13 is the long road: a 3-to-5-year court-supervised payment plan in which priority taxes — the recent years and the trust-fund amounts — must be paid IN FULL through the plan, while older qualifying income taxes are treated like other unsecured debts and can be discharged for whatever the plan does not pay. Filing either chapter stops IRS collection under the automatic stay while the case runs, with narrow exceptions (audits and deficiency notices may proceed; levy generally may not).
Authority: 11 U.S.C. §§362, 507(a)(8), 523, 1322(a)(2); Pub. 908
Audit reconsideration
The audit closed, the assessment posted — and it is wrong, or it was built without you. There is an informal IRS process for exactly that, and it is free.
When it works — the three honest doors
Audit reconsideration is the IRS's informal process for reopening a closed examination. It exists for three situations: you have NEW documentation the IRS has never seen (the records existed but never reached the examiner); you NEVER APPEARED — you moved, the notices went to an old address, and the assessment was made by default, including assessments built on a Substitute for Return; or you can show the assessment itself is WRONG on its own terms — a credit disallowed despite qualifying facts, income counted twice.
What it is not
Reconsideration is not an appeal and has no statutory deadline or hearing right — it is a request the IRS grants as a matter of practice when the file justifies it. Critically, asking for reconsideration does NOT by itself stop collection: the balance remains collectible while the request is pending, so the collection side (installment agreement, hardship status, a levy hold) must be handled in parallel, and any live levy or hearing deadline from a final notice keeps running unless separately answered.
How to request it
Write to the IRS office at the address on your audit notice (or the campus that issued the assessment). Identify the tax year and the specific changes you contest, explain what is new or what went wrong, and attach copies — never originals — of the supporting documents; where the IRS directs it for income-tax cases, include a Form 1040-X reflecting the corrected return. Keep a copy of everything and proof of mailing. If the IRS accepts the request, an examiner re-reviews the file and the assessment is reduced, confirmed, or — rarely — increased; if it declines, the Appeals and Tax Court history of the case is unaffected, and the collection alternatives on this page remain.
Authority: IRS, “Audit reconsideration.” If the case is still inside its 30-day letter window (Letter 525), the Appeals protest on that letter is the stronger door — see the Notice Decoder.
CAP vs CDP — the two Appeals doors
Both end at the IRS Independent Office of Appeals, and they are not interchangeable: one is slower and keeps the courthouse open; the other is fast and slams it, in exchange for speed.
CDP — Collection Due Process: slower, with court rights
CDP exists only when the IRS itself hands you the door: a Notice of Federal Tax Lien filing, or a final levy notice (LT11, Letter 1058, CP90, CP297). Request the hearing on Form 12153 within 30 days of that notice and three protections attach: levy action is generally suspended while Appeals works the case; Appeals can consider collection alternatives — installment agreement, Offer in Compromise, hardship — and can hear a challenge to the underlying liability if you never had a prior opportunity to dispute it; and the outcome, a Notice of Determination, can be taken to the U.S. Tax Court within 30 days. Miss the 30 days and you may still request an equivalent hearing within one year — same conversation, but no levy-suspension guarantee and no Tax Court.
Form: Form 12153, to the address on the lien/levy notice
Authority: IRC §§6320, 6330; IRS, “Appeals — Collection Due Process”
CAP — Collection Appeals Program: fast, and final
CAP reaches collection actions CDP cannot: a lien, levy, or seizure before or after it happens, a rejected or terminated installment agreement, a denied lien certificate or subordination. The price of the speed is process: you generally must first confer with the Collection manager (installment-agreement cases are the exception), then file Form 9423; Appeals aims to decide within about five business days. The decision binds BOTH sides — the IRS cannot relitigate it, and neither can you: there is no Tax Court review of a CAP decision, ever. Choose CAP when the action is wrong and speed matters more than preserving a court door; choose CDP, when its door is open, whenever the liability itself is in dispute.
Form: Form 9423, after a conference with the Collection manager
Authority: IRS, “Appeals — Collection Appeals Program (CAP)”
Private debt collectors
Congress requires the IRS to hand some inactive debts to private firms — which makes the program a fraudster's favorite costume. The genuine article is identifiable in under a minute, if you know what a real assignment looks like.
The only three firms — verify the name
Congress requires the IRS to hand some inactive tax debts to private collection agencies. Since September 23, 2021 the contracted firms are exactly three: CBE Group Inc. (Waterloo, Iowa), ConServe (Fairport, New York), and Coast Professional, Inc. (Geneseo, New York). Callers naming other firms — Performant and Pioneer held contracts that ENDED before that date — are describing an arrangement that no longer exists. A name outside the three is a stop sign, not a conversation.
Authority: IRS, “Private debt collection” (current contractor list)
Two letters before any money — the authentication number
A real assignment announces itself on paper, twice. First the IRS writes to YOU: Notice CP40 names the firm your account is assigned to and includes Publication 4518, which explains the program. Then the firm sends its own letter. Both letters carry the SAME Taxpayer Authentication Number — a code printed on each. When the firm calls, you use that number to make the CALLER verify themselves to you before you confirm anything about yourself. No CP40, no firm letter, no matching number: the call is not the IRS's contractor, whatever the caller ID says.
Authority: IRS, “Private debt collection”; Notice CP40; Pub. 4518
What a collector legally cannot do
Private collectors work under the Fair Debt Collection Practices Act and a short leash: they can locate you, contact you, discuss the debt, and offer an installment agreement of up to seven years in full payment. They CANNOT levy your wages or bank account, file or release a lien, seize property, issue a summons — or settle your debt for less than the full amount. Every one of those powers stayed with the IRS. And every payment goes to the U.S. Treasury through IRS payment channels — never to the firm, never by gift card, wire, or prepaid card. A 'collector' asking for payment to themselves, or offering you a discount, has identified themselves as a fraud in one sentence.
Authority: IRS, “Private debt collection”; IRC §6306
Your exit door — send the account back to the IRS
Dealing with the firm is optional. You may ask — in writing, to the firm's address on its letter — to have your account returned to the IRS, and the firm must stop contacting you and send it back. Accounts are also not assigned at all in many sensitive situations the IRS lists (deceased taxpayers, minors, identity-theft victims, taxpayers in combat zones, and others). Returning the account does not erase the debt; it returns you to dealing with the IRS directly, under the IRS's own hardship and installment rules.
Authority: IRS, “Private debt collection” (opt-out and excluded accounts)
Still unsure whether a contact is real? Run it through the Scam Shield — the contact rules there settle most of it.
Every figure and rule on this page, with its source
- Bankruptcy tests — return due (with extensions) at least 3 years before filing; return actually filed at least 2 years before filing; tax assessed at least 240 days before filing, tolled while an Offer in Compromise was pending plus 30 days (CDP requests also extend it); fraudulent returns, unfiled returns, and trust-fund taxes never dischargeable; Chapter 13 must pay priority taxes in full through the plan: 11 U.S.C. §§507(a)(8), 523(a)(1); IRS Publication 908, Tax Guide for Bankruptcy.
- Audit reconsideration — informal reopening for new evidence, taxpayers who never appeared or never received notice, and assessments shown to be wrong; written request to the office on the audit notice; does not by itself stop collection: IRS, “Audit reconsideration.”
- CDP — lien or final levy notice; Form 12153 within 30 days; levy generally suspended; liability challenge if no prior opportunity; Notice of Determination appealable to Tax Court within 30 days; equivalent hearing within 1 year without suspension or Tax Court: IRC §§6320, 6330; IRS, “Appeals — Collection Due Process.”
- CAP — Form 9423; lien, levy, seizure, installment-agreement rejection/termination, lien-certificate matters; Collection manager conference first (except installment-agreement cases); Appeals aims to decide in about 5 business days; decision final for both sides, no Tax Court: IRS, “Appeals — Collection Appeals Program (CAP).”
- Private debt collection — current firms since September 23, 2021: CBE Group Inc., ConServe, Coast Professional, Inc. (Performant and Pioneer are former firms); Notice CP40 and the firm's letter share a Taxpayer Authentication Number; collectors cannot levy, lien, seize, or settle; payments only to the U.S. Treasury through IRS channels; written opt-out returns the account to the IRS: IRS, “Private debt collection”; IRC §6306.
- Standing options — streamlined online installment agreements for individuals owing $50,000 or less; Offer in Compromise fee $205 with 20% down on lump-sum offers (low-income waivers); Currently Not Collectible hardship status; First Time Abate and reasonable-cause penalty relief; the 10-year collection statute (CSED): IRS, “Payment plans,” “Offer in Compromise,” “Penalty relief,” and “Collection statute expiration.”
Came here from an unfiled year? Balances route here after filing — the Unfiled Years Factory prepares the returns; this desk settles what they show.