With tax season comes a deluge of scammers claiming they can settle your tax debt for pennies on the dollar. Some promise your debt can be wiped clear in as few as five minutes. If you are behind on your tax payments, there are tax debt relief programs. But none of these are as fast or simple as scammers promise. Here is what everyone hates about legitimate tax relief programs.
Everything Wrong With Tax Relief Programs
Offer in Compromise
An Offer in Compromise is one of the most common tax resolution programs. But that doesn’t mean it’s the best option. Don’t make the mistake of deciding on an Offer in Compromise, or OIC, just because it’s the first tax relief program offered to you. If you qualify for periodic payment with an OIC, this is a great option. However, many people only qualify for a lump sum cash option.
With periodic payment, you have five to 10 years to pay your debt off. However, under the lump sum cash method, you must submit at least 20% of the total offer amount. Then, you have only five payments to pay off your remaining balance. With the help of a tax consultant, you can get the best deal possible.
If you don’t qualify for an Offer in Compromise, chances are the IRS doesn’t believe paying your tax debt in full will create an undue burden on you. When that assessment is made, your next option is an installment agreement. Before the Fresh Start Initiative was passed in 2011, Federal Tax Liens, or FTLs, could be filed when you were delinquent by only $5,000. Today, that limit is $50,000.
Installment agreements have their advantages. Namely, you get 72 months to wipe the slate clean. Unfortunately, interest and penalties are still accruing during this time. If you owe tens of thousands of dollars, or have been delinquent, all these extra fees can make it nearly impossible to pay your tax debt in full. What everyone hates about this tax relief program is the interest accrues, monthly at a rate of 12 to 18% annually, on the balance owed until it is paid in full.
Tax Debt Forgiveness
Tax debt relief isn’t exactly a tax relief program. People are aware that this scenario exists, but the truth is obscured. Tax debt forgiveness refers to the fact that the IRS will deem your debt uncollectible 10 years after it was due.
The IRS can classify your delinquent account with a Non-Collectible Status. In other words, they believe they cannot, for some reason, collect your debt even though you owe it. Your ability to pay is calculated using their RCP, or Realistic Collection Potential, formula. Variables that factor into this determination include insufficient funds, sudden loss of income, unemployment and natural disaster. However, your tax debt is not “forgiven”. The IRS simply stops trying to collect it.
People hate this “tax relief program” because while their RCP is being assessed, they are still being sent certified letters, they are still being called and they still have IRS revenue agents show up at their home. In some cases, your income or assets may be threatened while a determination is being made on your ability to pay.
Schedule Your Initial Consultation Today
Tax relief programs are hard to navigate on your own. The qualifications of such programs are extremely specific and the instructions for the forms are cumbersome. Luckily, you’re not alone. For tax debt relief, contact the friendly professionals at Geaux Tax resolution today to schedule your initial consultation. With over 25 years of experience, we have the knowledge and skills to help you negotiate your delinquent tax debt successfully.