Reference
Tax relief, in plain words.
The terms the IRS and state use can feel like a second language. This glossary defines the ones that matter most — clearly, and without jargon — so you can understand your notices and your options.
- Collection Due Process (CDP) Hearing
- Your right to an independent hearing before the IRS levies your property. You must request it within 30 days of receiving a Final Notice of Intent to Levy — doing so pauses the levy while your case is reviewed.
- Collection Statute Expiration Date (CSED)
- The 10-year deadline after which the IRS can no longer collect a tax debt. The clock starts when the tax is assessed. Certain actions (an installment agreement, an offer, a bankruptcy) can extend it.
- Currently Not Collectible (CNC)
- A status that places your account on hold when paying the debt would create economic hardship. Collection pauses, but the debt remains and interest continues to accrue. The IRS may review your finances periodically.
- Discharge of Lien
- The removal of a federal tax lien from specific property — typically when the property is sold, the debt is paid, or the lien is no longer needed to protect the government's interest.
- Effective Tax Administration
- A ground for an Offer in Compromise when collecting the full debt would be unfair or create exceptional hardship, even though you could technically afford to pay. The rarest of the three OIC grounds.
- Federal Tax Lien
- A legal claim the IRS files against your property once a tax debt is assessed and unpaid. It attaches to your assets and anything you acquire, damages your credit, and can cloud property titles.
- Final Notice of Intent to Levy
- The notice (LT11 or CP90) that legally authorizes the IRS to seize your property. By law the IRS must wait 30 days after issuing it before levying — and that window is also your chance to request a CDP hearing.
- First-Time Penalty Abatement
- A one-time removal of a penalty for taxpayers with a clean three-year compliance history — all returns filed and no prior penalties. The simplest path to penalty relief, requiring no proof of a specific cause.
- Innocent Spouse Relief
- Relief from a joint tax liability caused by a spouse's error or omission that you didn't know about and had no reason to know about. Related forms include separation of liability and equitable relief.
- Installment Agreement
- A plan to pay tax debt over time in monthly payments negotiated with the IRS or state. Types include streamlined, partial-pay, and non-streamlined (financially verified) agreements.
- IRS Levy
- The legal seizure of your property to satisfy a tax debt — wages, bank funds, retirement accounts, or other assets. A levy is the enforcement action; the lien is the claim that precedes it.
- Offer in Compromise (OIC)
- An agreement to settle tax debt for less than the full amount owed, based on what the IRS believes it can realistically collect from you. Evaluated under doubt as to collectibility, doubt as to liability, or effective tax administration.
- Partial-Pay Installment Agreement
- A payment plan where your monthly payments won't fully satisfy the debt before the collection statute expires. Any balance remaining at the CSED may be forgiven. The IRS reviews these periodically.
- Penalty Abatement
- The removal of IRS penalties when reasonable cause exists for the failure, or when first-time abatement eligibility applies. Removing a penalty also removes the interest that accrued on it.
- Power of Attorney (Form 2848)
- The authorization that lets your representative speak to the IRS on your behalf, review your account, and negotiate — so the agency deals with your representative instead of contacting you directly.
- Reasonable Cause
- A legitimate circumstance — serious illness, a death in the family, a natural disaster, reliance on bad advice — that explains a failure to file or pay on time. The basis for a reasonable-cause penalty abatement request.
- Reasonable Collection Potential (RCP)
- The IRS's calculation of how much you can pay — the value of your assets plus a multiple of your future income. This figure drives the offer amount in an Offer in Compromise.
- Streamlined Installment Agreement
- A simplified payment plan for balances under a set threshold, requiring minimal financial disclosure. The IRS generally accepts the proposed payment without deep review if it pays the debt within the collection statute.
- Subordination
- An IRS action allowing another creditor to move ahead of a federal tax lien — useful when you need to refinance a home or obtain credit that the lien would otherwise block.
- Tax Transcript
- An IRS record of your account showing assessments, payments, penalties, interest, and pending actions. Transcripts reveal the full picture of your tax standing — far more than a single notice does.
- Trust Fund Recovery Penalty (TFRP)
- Personal liability assessed against responsible persons for unpaid payroll taxes withheld from employees. It applies to the trust-fund portion only and can be collected from personal assets.
- Wage Garnishment
- A levy on your wages, where the IRS directs your employer to send a portion of each paycheck to the IRS until the debt is resolved or the levy is released.
A term isn't the same as an answer.
If something here describes your situation, the next step is a confidential conversation. I'll explain how it applies to you — and what we can do about it.
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