Who Qualifies for IRS Tax Debt Forgiveness?

February 15, 2022

Owing the IRS money is a stressful thing. If you are in debt with the IRS, then you might be wondering if you qualify for tax debt forgiveness. Here are a few factors to consider, as well as how a tax settlement company might be able to help you. Dealing with taxes is never fun, especially federal tax debt to the IRS. If you owe money to the IRS, this can be a huge strain on your financial situation, as well as your emotional and physical health. While many American citizens receive refunds for the taxes, there are plenty of others that may find themselves struggling to pay what they owe.

Who Qualifies for IRS Tax Debt Forgiveness?

In some circumstances, you may be able to get tax debt relief from the IRS. Not everyone is going to qualify for forgiveness, but if you do, this could be an effective way to get yourself out of a dangerous and uncomfortable financial situation.  

The way that you qualify for debt forgiveness depends on the reason why you are not able to pay your taxes. When you sit down with a tax expert, they will be able to take a look at your situation and determine if you qualify.

These are a few factors that the IRS will take into account when considering debt forgiveness:
•    A $200,000 income cap for married couples who are filing jointly
•    A $100,000 cap for single filers
•    A tax balance under $50,000
•    A drop in income of 25% if you are self-employed

What Else Can Help You Qualify for Forgiveness?

There are a few additional factors that can help you with your tax forgiveness. If you fall into one of the following categories, then you may be able to get even greater debt forgiveness. It might also be possible for you to receive complete forgiveness of your back taxes.

Innocent Spouse

If you have been divorced, then you might be able to prove that you qualify for debt forgiveness from the IRS. The innocent spouse provision is designed to protect former spouses from tax debt that their former spouses may have caused.

Essentially, you will need to prove to the IRS that your former spouse was responsible for any incurred tax liability. You will also need to prove that you were not involved in this liability and that you were not aware of any errors your former spouse may have made. When it’s successful, this should move the debt over to the responsible party rather than yourself.

Natural Disaster Assistance

If you have experienced a natural disaster that has impeded your ability to pay your taxes, then this could help you qualify for debt relief. To qualify for natural disaster assistance, it will need to have been a federally declared disaster. Examples include hurricanes, wildfires, and flooding.

This will allow you as a taxpayer to claim casualty losses for your property and business if you are a business owner. Taxpayers who have been affected by a declared natural disaster will usually be given extensions to gather necessary paperwork after a disaster. But you may also be able to seek out forgiveness for your debts.

Currently Not Collectible

While many situations can help you qualify for partial forgiveness of your debt or at least an extension on paying it, there are some cases where it truly is not feasible for you to pay off your debts at all. These situations can cause a lot of stress and anxiety, but it might be possible for you to clear this debt entirely.

If this sounds like your situation, you might qualify as being Currently not Collectible. Essentially what that means is that your finances are in a state where making any payment to the IRS for your debts would put you under significant financial strain. Be aware that this status is temporary, and that the IRS can choose to revisit it at any time. They will also still be able to file a tax lien against you.

Why Should You Work with a Tax Settlement Company?

If you are in debt with the IRS, this can affect your life in a lot of surprising ways. If you are not able to pay your debts, then it’s important to find ways to alleviate this financial burden.

You can try dealing with the IRS on your own, but working with a tax settlement company can provide you with the support you need to see actual results. They’ll help you navigate the complicated world of taxes and help you find financial relief. That said, there are many companies out there that offer “relief” when really, they’re just trying to swindle you out of your money. Here’s how to tell that you’re working with a company you can trust.

The Company Wants to Know Why You Fell Behind

If a tax settlement company is going to be able to help you, then they need to understand how you wound up in this situation in the first place.

Whether you’re in trouble with the IRS because you fell behind on your payments or you simply failed to file in the first place, this knowledge is important for the tax settlement company to know. If the company you’re interested in doesn’t try to find out this information, that’s a major sign that they’re not people you want to work with.

The Company Will Work Hard to Gather Necessary Documents

Dealing with taxes often means dealing with a lot of paperwork. You may find yourself confused about where to seek these documents out and what they all mean. That’s where a tax settlement company can help you.

The company should help you gather documents like form W-4, form 1040, and form 656. If they’re not helping you to gather these documents or they don’t seem to find them necessary, it’s time to find another company to help you.

The Company Will Help You Manage Your Expectations

The reality is that not everyone is going to be able to get complete forgiveness for their tax debt. There may be ways to get extensions or lower your payments, but the IRS is usually pretty firm about getting their money.

A good tax settlement company will be honest with you about this. They’ll tell you the truth about your situation and avoid making any false promises, allowing you to effectively manage what expectations you have.

They’ll Personalize Your Plan

No two people’s financial situations are the same. That means that the solutions to their tax-related issues can’t be the same either. That’s something that the tax settlement company that you’re working with should be very aware of.

If the company you’re working with is a good one, they’ll personalize your plan for your unique situation and needs. Rather than applying a one-size-fits-all solution, they’ll match your situation with the IRS program that will work best for you.

Knowing if you qualify for debt forgiveness from the IRS is just one step of the process. The next step is actually seeking out that forgiveness. Working with a quality tax settlement company can make all the difference and help you get the relief you need. Learn more about how we can help you at Geaux Tax Resolution.