Dealing with tax debt can feel overwhelming, but knowing the terms can make it easier to take control. This glossary explains common tax relief and debt-related concepts in simple language. Use it to navigate your tax situation with confidence. Need help applying these terms to your case? Take our free 60-second Tax Relief Quiz to see what options you qualify for at no cost.

Adjusted Gross Income (AGI)

• • Your total income minus certain deductions (e.g., retirement contributions or student loan interest). AGI determines eligibility for tax credits, deductions, and relief programs like installment agreements. Learn more on IRS.gov.

Back Taxes

• • Taxes owed from past years that haven’t been paid. This can happen if you didn’t file a return, underreported income, or didn’t pay the full amount due. Penalties and interest add up over time, making it critical to address back taxes quickly. IRS: Back Taxes Info.

Currently Not Collectible (CNC)

• • An IRS status for taxpayers who can’t pay their tax debt due to financial hardship. Collection efforts pause temporarily, but interest and penalties keep growing. You’ll need to submit financial proof, and the IRS will check your status periodically. IRS: CNC Details.

Failure-to-File Penalty

• • A penalty for not filing your tax return on time—5% of unpaid taxes per month, up to 25%. Filing late, even without full payment, avoids this charge. IRS: Late Filing Penalties.

Failure-to-Pay Penalty

• • A penalty for not paying taxes by the due date—0.5% of the unpaid amount per month, up to 25%. Paying what you can on time reduces this cost. IRS: Late Payment Penalties.

Fresh Start Program

• • An IRS initiative that makes it easier to resolve tax debt through flexible installment agreements and offers in compromise. It also offers lien relief for qualifying taxpayers. IRS: Fresh Start Program Info.

Installment Agreement

• • A monthly payment plan to settle tax debt over time. Options include short-term (up to 180 days) or long-term (up to 72 months) plans, based on what you owe. Fees may apply, but low-income taxpayers can get them reduced or waived. IRS: Payment Plans.

Interest

• • A daily compounding charge on unpaid taxes. The rate adjusts quarterly and applies to both the tax debt and penalties. Paying off your balance ASAP keeps interest low. IRS: Interest Rates.

Offer in Compromise (OIC)

• • An IRS deal to settle your tax debt for less than you owe. You must show financial hardship or doubt about the debt’s validity or collectibility. The IRS reviews your income, expenses, and assets to decide. IRS: OIC Overview.

Penalty Abatement

• • A request to reduce or remove IRS penalties for a valid reason, like illness or a natural disaster. You’ll need to write to the IRS with proof. IRS: Penalty Relief.

Substitute For Return (SFR)

• • A tax return prepared by the IRS when a taxpayer fails to file their own. The IRS uses available data (e.g., W-2s, 1099s) to estimate income, often excluding deductions and credits, which can result in a higher tax liability. You can file your own return to correct the SFR and potentially lower the amount owed. IRS: SFR Info.

Tax Audit

• • An IRS review of your tax return to check its accuracy. Audits can stem from errors, random checks, or linked cases. You’ll need records to back up your filing. IRS: Audit Basics.

Tax Levy

• • The IRS seizing your assets (e.g., wages, bank accounts, or property) to cover unpaid taxes. They send notices first, giving you a chance to act before seizure. IRS: Levy Info.

Tax Lien

• • A legal claim the IRS puts on your property when you don’t pay your tax debt. It protects their interest and can limit your ability to sell or refinance. A public Notice of Federal Tax Lien may be filed. IRS: Lien Info.

These terms are a starting point, but every tax situation is unique. Take our free 60-second Tax Relief Quiz to get expert guidance tailored to your needs.