The IRS has comprehensive programs which allow individuals of different backgrounds to settle or reduce their back tax debt and get tax relief. Since each taxpayer’s finances are unique, our tax resolution experts find a specific solution for every unique case. Between three and five categories will usually broadly define the solution to a taxpayer’s problem.
Here’s an alphabetical list of tax relief solutions for the most common tax debt problems. Please go through these concise solution descriptions to see which categories apply to you. Then research your categories further by clicking through to more specific articles in the BLOG CATEGORIES list over in the column on your right to better understand where you stand with your tax problem resolution.
Abatement
The IRS can grant abatement and remove penalties or interest if there is a legitimate reason for not paying taxes on time. Penalties and interest can make up a large percentage of the of the overall tax debt, frequently as high as 25% to 50%. Abatement can lead to penalty removal and elimination of interest associated with the penalty, resulting in tax relief. However, the original tax amount cannot be reduced through abatement.
Amended Return
Filing an amended version of a previously filed IRS tax return is sometimes necessary to correct an error. An error on a previously filed tax return can result in an overstatement of taxes due. It is important to use the amended tax return form and not an original tax return form. You do not need to file an amended return for mathematical errors but you do need to file one for changing filing status, dependents, income, deductions, or credits, all of which can affect taxes greatly.
Appeal Tax Ruling
As a taxpayer, you have the right to appeal an IRS tax ruling. One advantage to filing an appeal is the IRS will typically suspend their efforts at collecting the tax debt. This reprieve gives you time to meet with a tax resolution expert to develop a defense. You will need to request for the auditor’s file as well as file a formal letter of protest. Also, you need to gather as much documentation as possible to support your case. Make sure that your fully prepared case is sent by a secure delivery service.
Bankruptcy
Some taxpayers see bankruptcy as the solution to their IRS tax debt problems. Bankruptcy does not necessarily get you tax relief. You should have a certified tax resolution specialist examine your individual case for potential discharge of back taxes. Also, Chapter 13 remains on your credit report for seven years and Chapter 7 remains for ten years. So getting a credit card, automobile loan, or mortgage becomes difficult for a long time after it. As an alternative to bankruptcy, an experienced tax resolution expert can explore other ways to get your total tax debt reduced or get you on an affordable payment plan. Avoiding bankruptcy, while settling your debts and securing your future, is often the preferred path.
Currently Not Collectible
If you have no assets or income above that which is necessary to cover living expenses, you become “currently not collectible”. Collections against you will temporarily stop. You will need to reveal all your financial information (for the IRS on Form 433-F). This proves your lack of attachable income or saleable assets and presents you as having poor collection potential. This is a temporary form of tax relief, and only applies in some situations.
Extensions
Once collection begins, asking for an extension from the IRS is easy. If you are not able to pay taxes at the time, simply send a letter with the bill stating that you cannot pay right now and ask for another month or two to pay. Repeating this procedure several times is possible. This can sometimes give you the time you need to pay off the tax debt without entering a payment plan. The IRS is occasionally inefficient and you may go a year or more before you receive another letter. This can result in a delay in being required to pay off your balances. This is example of temporary tax relief, but you cannot depend on this happening often.
File Unfiled Returns
If you have an outstanding tax debt problem with the IRS, they will not resolve the issue until you have filed all un-filed tax returns. Only when you are current, can you take steps toward resolving the problem. Those who do not file tax returns can face criminal charges and fines. Typically, non-filers cannot find essential tax documents like the W-2 and 1099 forms from previous years. The IRS will provide a printout with the missing information but cannot produce the original documents.
Innocent Spouse Relief
When two individuals file a joint return, typically each is liable for the taxes, penalties and interest owed to the IRS. Occasionally, the tax liability is the responsibility of just one individual. The IRS has created three categories of innocent spouse relief for such instances. If one of these categories qualifies you, then the other spouse is can be determined to be responsible for the entire tax liability. The innocent spouse thereby gets tax relief.
Installment Agreement
The most common form of tax resolution for taxpayers with enough assets or income to settle an IRS tax liability, is an installment agreement. It is typically easy to arrange an installment agreement for tax debt under $25,000. Greater amounts can make the process more complicated. An installment agreement is the quickest way to get a levy release. Paying what you owe in smaller monthly amounts makes it more convenient. However, it is best to consult with a tax resolution specialist who can help the taxpayer decide which tax relief solution better fits their finances, since there may be a better option for you.
Offer in Compromise
Taxpayers can settle a tax liability due to the IRS by using an Offer in Compromise. Effective use of this powerful tax relief solution can result in settling a tax liability for far less than the total amount. It relies on a formula that considers your assets, liabilities and disposable income. “Perceived Equity” and “Reasonable Collection Potential” determine the acceptability of your offer. Depending on your current and future financial status, you might be able to reduce your tax debts. It is best to consult a tax resolution expert with extensive knowledge in the Offer in Compromise area.
Pay Back Taxes
Tax debts owed to the IRS are usually complex matters, and while there are ways to reduce or even cancel the tax liabilities, they need to be done correctly. A tax resolution expert can help you correctly file and amend your tax returns, as well as ensure that all due amounts, penalties and interests are accurate.
Representation
Most taxpayers wonder if it is necessary to hire someone to help them deal with an IRS tax problem. The Taxpayer Bill of Rights grants taxpayers the right to representation by one of these three authorized professionals: Enrolled Agents, attorneys and CPAs. Most IRS employees prefer dealing with a professional since they are familiar with the forms, methods and processes utilized by the IRS
