What Tax Forgiveness Programs Are Available to Louisiana Residents?

January 1, 2023

Experts estimate that over 11 million Americans currently have tax debt. If you’re worried about how you’ll pay your federal or state taxes this year, reach out to a Louisiana tax resolution specialist. They will analyze your income, expenses, and past tax returns to figure out which IRS forgiveness program you qualify for. There are several options that can either extend your deadline or reduce your debt.

Louisiana Tax Resolution: What Forgiveness Programs Are Available to Louisiana Residents?

People who have a lot of tax debt often feel like they’re out of options, but this isn’t the case. The best way forward is to reach out to a tax resolution expert, who will go through your situation with you and help you find an appropriate solution. The IRS provides several options for people who aren’t able to pay their tax debt. The most accessible one is the installment agreement, which allows taxpayers to spread out their payments.

The offer in compromise is more selective, but it reduces your bill. You might not have to pay anything at all if you qualify for innocent spouse relief or currently not collectible status. Your tax professional will also consider whether your fees and penalties could be removed from your account. This is often one of the easiest ways of reducing people’s tax debt.

An Installment Agreement 

When you don’t pay your taxes on time, you accumulate hefty penalties on your account. The IRS will add 0.5% to your total bill each month and charge interest, which is calculated daily. After some time, they place a levy on your property, which means that you might lose your assets, or your wages could be garnished.

Setting up an installment agreement is usually the simplest solution because it stops any collection activity and allows you to pay off your debt in your own time. Taxpayers who owe a small amount can quickly and easily set up a payment plan online, while those with a lot of debt have to call the IRS or complete a form.

Is the Installment Agreement the Best Solution?

The Installment Agreement is much cheaper and less risky than simply not paying your taxes. However, it isn’t the best solution for everyone because interest is still added to your account, and you might still face some penalties. If you have good credit, you are better off applying for a low-interest credit card or loan and paying your taxes right away. It all depends on the interest rate you’re offered and your payment timeline.

An Offer in Compromise

The offer in compromise is one of the most sought-after tax resolution programs because it reduces the amount you pay the IRS. Unfortunately, the acceptance rate is quite low, so there is a big chance that your offer will get rejected. Before sending in your application, your tax resolution expert will help you to double-check that you are eligible.

To get your OIC accepted, it needs to be clear that you are unable to cover the full amount you owe. The IRS believes that most people can pay their taxes eventually, so they are very reluctant to accept offers for less than what taxpayers owe. Provide your tax professional with documents that demonstrate why paying the full amount would cause financial hardship.

Innocent Spouse Relief 

If you filed a joint return with your spouse, and they made a mistake you weren’t aware of, you might be eligible for innocent spouse relief. Possible tax mistakes are underreporting income, claiming incorrect credits, making incorrect deductions, or giving incorrect values for assets.

This is quite a specific IRS forgiveness program that only applies to people who live in a community property state like Louisiana and whose tax debt was caused by their spouse without their knowledge. Your Louisiana tax resolution specialist will ask you to provide details about your situation to determine whether you’re eligible.

Currently Not Collectible Status 

Sometimes, people’s financial situation changes so dramatically that they are no longer able to pay their taxes at all. They might have lost their job, quit to take care of a family member, or fallen ill. In this situation, taxpayers are granted currently not collectible status, and they don’t have to pay any taxes until their situation improves.

It’s important to note that your tax debt doesn’t simply vanish when you have currently not collectible status. If your situation changes within the next ten years, you’ll have to start paying again. The IRS will also keep charging penalties and interest, so you might end up owing more once your difficult financial situation is resolved.

Getting Your Penalties Removed

One of the easiest and most successful ways of reducing a person’s tax burden is to get the penalties and interest removed from their account. The IRS can charge a penalty of up to 25%, and interest accumulates on top of that, so getting these charges taken off can significantly reduce your debt. If you’ve never had any problems with the IRS before, the process is very easy, and you’re likely to succeed.

People who have already had trouble in the past will need to provide the IRS with a reason why they failed to file or pay their taxes on time. Some valid ones include the death of a loved one, an accident, or a serious illness. The first step is usually to call the IRS, but if you have a significant amount of debt, you might need to fill out a form.

What About State Taxes? 

In Louisiana, residents can get help with their state taxes as well as their federal taxes. Many of the programs available are quite similar. There is a penalty waiver, the option to set up a payment plan, and you can make an offer in compromise.

Instead of reaching out to the IRS, you’ll contact the Louisiana Department of Revenue. Since the application process is unique to this state, reach out to a local tax resolution specialist, who will be able to help you resolve your situation.

Can I Access the IRS Forgiveness Program On My Own? 

Sometimes, accessing the forgiveness program is quite easy. If you owe less than $50,000, you have a regular income, and you haven’t been in trouble with the IRS before, you can set up your installment agreement online or over the phone. In this case, you might not need to reach out to a tax resolution specialist. On the other hand, people who have large amounts of debt or those who don’t have the funds to pay what they owe need help.

Don’t make an offer in compromise without getting professional assistance. Only around one-third of OICs get accepted, so your chances of getting the relief you need are low, especially if you make a mistake when filing the paperwork. You will also benefit from assistance if you’d like to claim innocent spouse relief, since it can be hard to prove that you didn’t know about the tax error.

The IRS forgiveness program helps taxpayers who are struggling to pay their debt. The easiest option, an installment agreement, spreads out your payments over up to six years. However, there are other options that reduce your debt or allow you to stop paying temporarily. Call us at Geaux Tax Resolution for more information about how to get out of tax debt. Our Louisiana tax resolution specialists will be happy to help you resolve your situation.