Are you struggling with an impossibly large tax bill? If the Internal Revenue Service (IRS) is hounding you for payments, you are not alone. Each year, thousands and thousands of people realize that they owe more in tax payments than they can possibly pay.
Sometimes, the taxpayer only has to pay a few hundred dollars to cover their tax bill. In other cases, the tax bill seems like it would be impossible to ever pay off. If you are struggling to pay off your tax bill and get back on your feet, the right IRS debt relief program can help. There are several different programs available that can help you get rid of your IRS debt and start enjoying your life again.
What IRS Relief Options Are Available?
Each year, around $458 billion in taxes goes unpaid. For the IRS, this amount is known as the tax gap.
This tax gap is the difference between what average taxpayers owe the IRS and what they can actually pay. The entire job of the IRS is to collect money, so they have to solve this cash flow issue by getting you to pay back your taxes as quickly as possible. They can use liens, audits, wage garnishments, levies, fines, interest payments and public auctions to force taxpayers to pay their taxes.
All of these negative punishments are supposed to force you into paying or negotiating with the IRS. If taxpayers come forward to get help, the IRS offers help through tax relief programs. The IRS offers these programs because it makes it easier for them to collect taxes from people who are overwhelmed by their tax debt. By giving some leeway to struggling taxpayers, the IRS is able to collect at least some of the debt.
The idea behind this approach began with the IRS Restructuring and Reform Act (RRA 98
) of 1998. Legislators adopted this new approach to give taxpayers incentives to actually pay as much of their taxes as possible. These relief programs work as incentives for delinquent taxpayers who do not have assets or income for the IRS to take.
How Can You Get Relief?
There are a number of tax relief options you can get from the IRS. You can use payment plans, penalty relief, debt reduction and tax representation options to get help.
Debt reduction works if you cannot pay all of your tax debt and are willing to cooperate. The IRS will either cancel the entire debt or accept a smaller amount.
A payment plan involves setting up monthly payments. This means the IRS gets everything they are owed, but you do not have to struggle to pay all of the debt in a lump sum.
Penalty relief is when the IRS forgives or gets rid of fees and penalties that you were previously charged.
Tax representation is a part of the Taxpayer Bill of Rights. When you are audited or think the IRS has made a mistake, you have the right to use an authorized tax representative for your negotiations. Your representative must be a certified public accountant (CPA), an attorney or an enrolled agent.
You can get different kinds of debt relief from the IRS based on your income and other factors. Each program has different eligibility requirements such as the amount of debt. For example, only people who owe less than $50,000 can use online installment plans.
The Different Relief Programs
Struggling taxpayers can get help with reducing, managing or getting rid of their tax debt. Talk to your tax consultant to find out more about the different programs you can use.
Offer in Compromise
An offer in compromise involves paying less than the full amount. The IRS accepts less because they are uncertain about your liability. The IRS may believe that they cannot collect the debt. They may also accept an offer in compromise if paying the full debt would cause severe economic hardship.
To qualify, you have to file all of your required tax returns and be current on your estimated payments. You cannot be currently filing for a bankruptcy. This option is useful because you pay back less, and it can also suspend collection actions from other creditors. It does have stringent qualification requirements and may require asset liquidation, so it is not for everyone.
Currently Not Collectible Status (CNC)
If you can barely afford to eat, paying your taxes is probably impossible. The CNC status is for people who cannot afford their basic living expenses. If you get your account classified as CNC, the IRS will stop trying to collect your debt.
While the IRS may stop trying to collect the debt, you will still accrue penalties and interest costs. You pay nothing in the present, but this option may make it take longer to pay off your debts in the future. If you appear to be permanently stuck with a CNC designation, the IRS may cancel your debt entirely.
An installment agreement allows you to pay your bill over a period of months or years instead of all at once. This is the most common relief option for taxpayers. If your debt is less than $50,000, you can set up your installment plan online without having to actually deal with the IRS.
Installment plans are a useful way to resolve your debt, but they do not reduce the amount you owe. In actuality, you will end up paying more because of the added fees and interest.
Penalty abatement is a procedure where the IRS waives some of the penalties. Often, these penalties were originally charged because the taxpayer did not follow IRS regulations or tax laws. In some cases, penalties can be more than half of your tax bill.
You can ask for a penalty abatement if an IRS or tax advisor gave you bad advice. You can also ask for an abatement if this is the first time you received a penalty. If you suffered from a major disaster like a hurricane or a fire, you may also qualify for this option.
To get this option, you must file all of your tax returns. You should also pay off any taxes due and have no penalties during your previous three tax years. While most people will not actually qualify, this program can offer significant savings if you can take part in it.
Tax Liens Withdrawal
This option works if the IRS has a lien on your property because of unpaid taxes. A federal lien basically means you cannot sell or refinance your property. A lien automatically kicks in if you do not pay the taxes you owe the IRS within 10 days of getting the notice.
You can appeal the lien by asking for a judicial review. You only have 30 days to ask for this review. If you qualify, you will be able to sell your property and clean up your credit report.
The IRS can use a levy to make a legal claim to your property. This could be a one-time move involving the IRS seizing control of an asset like your bank account. It could also be an ongoing levy involving the garnishment of your paycheck.
You may be able to get the levy released by proposing a different payment method to the IRS, offering an installment agreement, filing for bankruptcy or claiming that the levy causes an economic hardship. A levy appeal can help you save your property, but the application process can be complicated.
Innocent Spouse Relief
This is a powerful tool that keeps one spouse from being liable for the other spouse's IRS debt. To get this relief, you have to show that one spouse was responsible for the understatement. The innocent spouse
cannot have known about the understatement.
Through this relief option, a spouse can avoid liability for the debt. It may even work in community property states. Even if you are denied, the IRS will review your case for equitable relief. However, the IRS may take six months to initially review your case. Your former spouse will also be notified, and he or she can appeal the decision.
There are also other relief options that are less common. For example, you could file for bankruptcy to reduce or get rid of your tax debts. Many of the different options you can use for IRS debt relief are fairly complicated, so it is important to get professional tax help and credit repair services as you go through the process.
Checklist for Getting IRS Debt Relief: What Company Can Help You the Most?
If you are struggling to pay back your tax bill, the right relief company and credit repair services can help.
Through a simple credit application
you can immediately find out if a credit company or lender can help you pay back your debt. Before you get involved with an individual company, you need to make sure you are not accidentally falling for a scam. A reputable business will possess the following qualities.
How long has the business existed? Do the CPAs, tax attorneys and loan officers have many years of experience?
If you want to have a successful experience, you should make sure you only partner with tax relief companies that have tax attorneys on their payroll.
If the company is any good at all, it will have positive reviews of its services. While there may be a negative review from time to time, the majority of the reviews should be neutral or positive.
A good company will be a member of professional associations like the National Association of Tax Professionals. Whether you are looking for a lender or an attorney, accreditation ensures a better experience. Accreditation organizations demand a minimum level of quality from their members, so you can be certain of getting at least adequate service.
If you need help with your taxes, you should make sure the company hires tax attorneys, enrolled agents and CPAs. To find out, ask the company which tax professionals are on its staff.
Until you work with a particular company, you have no clue if they will be any good or not. Unfortunately, you do not want to invest money in a company that will not work for your needs. The best way around this problem is with a free consultation. Before you try out other organizations, try using a company that offers the initial consultation for free.
Some people merely need a lender to give them a three-year to seven-year loan to pay off their taxes. Other people want tax professionals to help them get an offer in compromise or other services. Before you work with a company, see if they offer the different services you need.
When you are working to repair your credit, you need flexible payments. The credit repair company
should make the process easier by offering flexible payment options. CPAs and tax attorneys are expensive, so ask about payment plans in advance.
If a company promises something that sounds too good to be true, it probably is. When a company promises to get rid of 80 percent of your tax debt overnight, you should be especially wary.
Power of Attorney
Before you work with any credit repair company, see if they are licensed by the IRS to act as a power of attorney within your state.
Look for In-House Representation
When you hire a company to help you repair your credit, you want the company to do all of the work. If you had wanted a third party to do the work, you would have hired the third party instead. Make sure the company you work with is actually going to use in-house representation.
Check the Fees
If you could afford to pay high fees, you would probably not have significant debts and a tax bill. Because of this, you need to find a credit repair company that will not charge too much. Before you hire someone, ask for an estimate so that you will not be surprised by any unexpected fees they send you later on.
Is the company financially sound? If the debt relief company cannot manage their own finances, it seems unlikely that they could help you out. In addition, you do not want to pay high fees to a company that will go out of business before they finish their work.
Get Credit Relief After Your Tax Troubles
At Swipe Solutions, we know how hard it is to deal with tax issues and maintain a good credit score. Whether you need a loan to pay off your tax debts or support with repairing your credit, we are here to help. Through the right tools, you can solve your tax issues and get your financial health back. To find out more, contact us or leave a comment in the comment section.