Tax debt can happen for any number of reasons, including a loss of income, a higher bill than expected, or increasing personal expenses. In fact, this problem affects millions of Americans every year, so if you’re having trouble paying your taxes, you’re not alone. Fortunately, there are a number of tax forgiveness programs that can help you to spread out your payments or even reduce your bill.
If you can’t currently pay your taxes, you might be eligible for “Currently Not Collectible” status, or you may be able to negotiate an offer in compromise with the IRS. Alternatively, you can ask for an installment agreement that spreads your tax debt over a longer time period. People who weren’t at fault but may be liable due to a mistake their spouse made can get innocent spouse relief. Let’s have a look at these programs and how they can save you money.
How Much Can Tax Forgiveness Save You?
There isn’t a definite amount of money that the IRS’s forgiveness programs can save you. Everyone’s situation is different, so a lot will depend on your current level of debt, the reason why it has occurred, your financial means, and which form of relief you are eligible for. Having a part or all of your balance forgiven will be hard because the IRS believes that everyone should pay the taxes they owe, and they will try everything to collect them.
However, they are not unreasonable, and they understand that some people are facing difficult circumstances. Even if you end up having to pay the balance due, you might be able to have some of the fees taken off, which can be a great relief. The best way to find out more is to speak to a qualified tax resolution specialist, who can tell you which program fits your situation and how much you can expect to save.
What Types of Tax Relief Are There?
There are a number of different forgiveness programs out there, and they all serve different purposes. Before allowing you to reduce your tax bill, the IRS will examine your current income, expenses, and the debt you have accrued. Taking all factors into consideration, they will decide whether you are eligible for relief or not. Read on to find out more about the different programs you could qualify for.
Offer in Compromise
One of the best types of relief out there is an offer in compromise (OIC), which allows you to pay only part of your outstanding tax balance. This is designed for people who will face genuine hardship if forced to meet their full obligation. For example, you could qualify if it would be hard for you to sustain your family after paying the bill.
If your offer is accepted by the IRS, they will allow you to pay a much smaller amount, so you might reduce your tax bill by 50% or even more. It all depends on how much you can reasonably be expected to pay in the eyes of the IRS. Your tax specialist can help you to determine whether this is a valid option and, if so, how much you should offer to pay.
Currently Not Collectible
An even more drastic measure than the OIC is “Currently not Collectible” status, which instantly lifts your tax burden. This type of arrangement is suitable for people who have no means to pay their tax bill and are facing wage garnishment and other action by the IRS. Any collection activities will be stopped immediately once you have achieved this status, so you don’t have to worry about losing your house, car, or wages.
It’s important to remember that CNC status isn’t forever, and if your financial situation changes, you might still be liable to pay the tax. An exception would be if the 10-year statute of limitations is over before your status changes.
Not everyone is eligible for a reduction in their tax bill or CNC status, but there is another solution that could lighten your tax burden. An installment agreement spreads your payment out over a greater time period, so you have much longer to pay. Instead of insisting on a prompt payment of everything that’s overdue, the IRS will determine a more reasonable schedule that doesn’t cause you financial hardship.
Innocent Spouse Relief
Sometimes, you might face a difficult tax situation through no fault of your own. For example, your spouse may have understated their income, overstated their expenses, or otherwise failed to file or pay their taxes correctly. People who can prove that they had no knowledge of this issue won’t be punished for it, so you might not be liable to pay your spouse’s tax bill. This can significantly reduce or even eliminate your debt completely.
Penalty and Fee Forgiveness
As mentioned, many people won’t be eligible for tax forgiveness because the IRS aims to collect everything owed to them. In fact, around 60% of offers in compromise are declined. However, the tax you owe isn’t the only thing you’ll have to pay. On top of it, there will be hefty penalties of up to 25% of your total tax debt plus interest that accumulates daily.
These fees add a significant amount of money to your debt and make the situation much worse for you. Luckily, they can be easier to eliminate, particularly if you’ve never had an issue with the IRS before. Your tax specialist can help you to ask them to remove the fees, so you’ll only be liable for the actual debt and not the penalties or the interest.
How Can You Access these Programs?
Now you know the different types of relief offered, you might wonder how you can access them. Is the process complicated? What forms do you have to fill out, and what will the application cost? The best way to find out is to hire a tax resolution specialist who is familiar with cases like yours. They will invite you for an initial consultation and discuss the problem, then come up with a strategy to eliminate your tax debt for good.
By working with a professional, you can avoid missing deadlines, making mistakes on your application, or wasting valuable time applying for a program you’re not eligible for. Remember that interest on your tax debt accrues daily, so every day you delay, your payment increases. For this reason, getting in touch sooner rather than later is always preferable.
Know Your Options
There is a wide variety of options when it comes to tax forgiveness, and every program works in a different way. While an offer in compromise, innocent spouse relief, and “Currently Not Collectible” status can reduce or eliminate your bill, an installment agreement simply spreads out the expense over a longer timeframe. If you work with a competent tax professional, you may also be able to eliminate the fees and penalties you have accrued.
Get in touch with us today at Geaux Tax Resolution in Lafayette, LA. We work with people from all walks of life who struggle with tax debt, and no amount is too small or too big for us to take on. With 35 years of experience in the field, our team is optimally equipped to help you choose and apply for the appropriate type of relief, so you can leave your problems behind you once and for all.