When it comes to tax debt forgiveness, the term can be a bit misleading. The term suggests the IRS is more than willing to forget that you owe them back taxes and let you move on with your life. This isn’t something that happens often, so understanding exactly what is going on with your tax debt is important.
Tax Debt Forgiveness Terms
Should you find yourself owing the IRS more in taxes than you can afford, you need to be aware of your options. While you may not have your debt completely forgiven, you may be able to go on a payment plan or have the amount you owe reduced. Below are the terms that apply to tax debt forgiveness and what they mean.
Offer in Compromise
This is the closest thing you will get to not having to fulfill your payment obligations to the IRS. However, qualifying for this program is incredibly tough. In essence, this is a settlement agreement that you and the IRS come up with to forgive your debt.
To qualify for an Offer in Compromise, you have to divulge a lot of information to the IRS, including how much income you have, any assets you own, how much you owe in taxes, and your ability to pay back that amount. You are unlikely to get this offer unless you are in extreme circumstances; for example, if you’re at your end of life and have had to spend all of your money on healthcare, leaving nothing left for the IRS.
However, if the IRS goes through your finances and finds that you can liquidate your assets to pay off your debt, then you won’t qualify for this program—and you will more than likely lose your assets. Very few people are granted this type of tax debt forgiveness, and the circumstances have to be dire.
Currently Not Collectible
Another route you might try to get tax debt forgiveness includes requesting Currently Not Collectible. To qualify for this program, you have to prove that paying any amount towards your debt will put you in financial hardship. If you stay in this financial situation long enough, you may outlive your debt and never have to pay a cent.
However, the downside to this program is that the IRS will regularly reassess your situation and ability to pay. If your financial situation improves, you will no longer qualify for Currently Not Collectible and will have to start paying your tax debt back.
This isn’t a tax debt forgiveness program per say, but if you can prove that the tax debt isn’t yours, then you may not be liable to pay it. In essence, if your spouse had tax issues in the past and currently owes the IRS money, but you had no part in their errors or what they did, then you may be able to avoid having to pay for their mistakes. To qualify, you’ll have to provide valid documentation that supports your claim.
More than likely, the IRS will not forgive your debt unless you can prove beyond a reasonable doubt that you can’t pay it. However, the IRS may be more than willing to work out a payment plan with you for your tax debt forgiveness. You will probably still have to pay interest and have a certain amount do every month until your debt is paid off, but this can make paying what you owe easier and the total amount may be reduced.
Working With an Accountant
The world of tax debt forgiveness can be confusing, and the terms can be misleading or hard to understand. If you find that you need assistance with tax debt, contact Geaux Tax Resolution. Their professionals are ready to assist with all of your tax needs.