Americans are paying off crushing amounts of tax debt. Meanwhile, tax season is nearly upon us. This makes those tax debts feel all the more pressing.
If you know you will never be able to pay off your huge tax bill; you can make a better case to the IRS for tax debt forgiveness. Of course, the IRS has limits on how much they will forgive. Plus, you will have to meet certain criteria as a taxpayer.
Have you surpassed the limit on your patience with tax debt? Here are some ways to qualify for IRS debt forgiveness.
Keep reading!
Offer In Compromise (OIC)
Taxpayers who qualify for IRS debt forgiveness can often use Offer in Compromise (OIC) to reduce their tax debt. Those who qualify must be able to demonstrate that paying the full amount of the debt would cause them significant financial hardship. Qualifying taxpayers may also be able to settle their debt for less than the original amount owed.
An OIC can provide taxpayers the relief they need to get back on track with their current debt obligations. Taxpayers should contact an experienced tax professional to learn about IRS debt forgiveness program and how to qualify.
Installment Agreement
With an installment agreement, taxpayers can make monthly payments to the IRS debt until it is paid off. Depending on the taxpayer’s situation, the IRS may even forgive part or all of the outstanding debt. To be eligible for an installment agreement, taxpayers must provide the requested financial information to the IRS via Form 433-F.
The IRS will then evaluate the taxpayer’s financial situation and assess whether the taxpayer can pay the debt in full or if they need an installment agreement. If an installment agreement is accepted, the amount paid each month must be sufficient to cover the outstanding balance over a set period of time.
Currently Not Collectible (CNC) Status
Currently Not Collectible (CNC) Status is a form of IRS debt forgiveness that taxpayers can qualify for when they are unable to pay IRS back taxes due to financial hardship. This status puts a halt on collection activity, such as levies and garnishments on wages and bank accounts, and sparks a temporary tax debt relief.
To be granted CNC Status, taxpayers must first provide the IRS with detailed financial information, which includes income and expenses to prove financial hardship. Taxpayers must provide overall asset information, such as bank accounts and retirement accounts.
It’s important to note that CNC status does not eliminate taxes due, only pauses collection activity until the taxpayer can afford to pay the amount owed.
Innocent Spouse Relief
This type of relief is known as Innocent Spouse Relief and is intended to protect taxpayers from being held responsible for taxes owed due to errors made by their spouse. To qualify, taxpayers must have filed a joint tax return with an incorrect amount stated. And must demonstrate that they had no knowledge of the incurred tax debt at the time of filing.
Taxpayers may also be eligible if they can prove they entered into the joint filing out of good faith, and would suffer an economic hardship if forced to pay the tax debt. To claim Innocent Spouse Relief, taxpayers must fill out Form 8857 and provide any supporting documents that prove their eligibility.
Bankruptcy
Bankruptcy has the potential to substantially reduce or even wipe out a taxpayer’s IRS debt burden. There are two forms of bankruptcy available to taxpayers for IRS debt relief: Chapter 7 and Chapter 13.
Generally, Chapter 7 proceedings require the filing of a petition with the appropriate court. The debtor must pass a “means test” to ensure that no assets or resources are available to pay the IRS debt. Once the bankruptcy petition is approved, all IRS debt is discharged, meaning it is erased.
Chapter 13 offers the alternative of debt repayment through a formal plan that is approved by the bankruptcy court. Once the repayment plan is accepted, all IRS debt is forgiven, leaving the taxpayer without an IRS debt burden.
Tax Debt Relief
Tax debt relief can provide taxpayers relief from IRS debt. Eligibility criteria vary based on the type of tax debt. Generally, taxpayers who owe money to the IRS because of errors made by the IRS, incorrect filing, or any other mistake may qualify for forgiveness.
Taxpayers with low income or a financial burden that prevents them from meeting their financial obligations may qualify for debt forgiveness. Taxpayers facing economic hardship, disability, or death may qualify for an abatement of the liability owed. This means that the taxpayer would have to pay a reduced amount or none at all.
Seek Professional Assistance
It is important for taxpayers to seek professional assistance for IRS debt forgiveness. The process should be treated seriously, and any mistakes made regarding forms, income, objectives, etc., can result in the application being denied. It is best to use a tax professional who is familiar with IRS debt relief to ensure the best possible outcome.
Tax professionals can assist with collecting the required documents, making sure those documents are accurate, and helping to figure out which program may be the best fit to pay off the debt. Moreover, they can guide taxpayers in making wise financial decisions and provide advice on how to set up a budget to pay off monthly bills in a timely manner.
Avoid Tax Penalties Through IRS Debt Forgiveness
Taxpayers can qualify for IRS debt forgiveness by taking advantage of different IRS programs such as Offer in Compromise, Partial Payment Installment Agreement, and Currently Not Collectible. By researching all the options and understanding their qualification requirements, taxpayers can take the essential steps to eliminate their tax debt.
To know which program is the best fit for them, taxpayers should consult an IRS-certified tax professional to receive the necessary guidance and expertise. Don’t waste another day. Take control of your tax situation now.
If you’re looking for more ways that will help you, then be sure to explore our blog for all of the answers to your question!