The Internal Revenue Service (IRS) gets a bad rap for doing its mandate. For taxpayers, the mere mention of the IRS is enough to get their heart rates up. There’s so much unwarranted apprehension when, in fact, the IRS is willing and able to assist you in all means possible. In particular, the IRS debt forgiveness program can help you if you have tax trouble and get back on the straight and narrow.
What is the IRS Tax Debt Forgiveness Program?
The U.S. Tax Code legally recognizes the IRS debt forgiveness program. This project’s goal is two-pronged. The first is the augmentation of tax debt collection, and the second is the easing of payment burdens for taxpayers. It’s the IRS’ way of saying that while it wants to stay true to its mandate, it’s also open to providing flexible solutions to taxpayers in trouble.
However, it’s entirely up to the IRS to determine which taxpayers they deem worthy of tax forgiveness. This decision is reached via transparent tax negotiation and case appraisal. Specific parameters are used to arrive at a judgment.
For instance, your income, expenses, and asset equity are taken into account. On top of that, you must prove you are presently incapable of paying back the amount within the usual timeframe.
5 Options of Debt Forgiveness
The IRS debt forgiveness program offers the following options for taxpayers in trouble.
Negotiate an installment plan
For most people, this is the instinctive approach to a tax debt. An installment agreement plan is how you communicate to the IRS that you are very much willing to pay off any existing debt within a mutually agreed time frame.
In this case, you have a few options, and each has its corresponding conditions. For example, the Guaranteed Installment Agreement requires you to not have filed for an installment agreement within the last five years. Other payment options at your disposal include Streamlined, Non-Streamlined, and Partial Payment.
Enter the Offer in Compromise (OIC) program
As the name suggests, OIC allows you to reach a payment settlement compromise with the IRS. Here, you pay less than what you owe and the IRS gives you a clean slate.
To qualify, the IRS must establish “doubt as to collectibility”. That means they deem your tax debt uncollectible in the foreseeable future for reasons including extreme financial hardship and other exceptional circumstances.
Change your status to “Currently Not Collectible”
This is another tax leeway for taxpayers currently incapable of paying tax debt. With this IRS status, tax collection will be delayed for a predetermined period, which usually lasts a couple of years.
To qualify, you need to prove to the IRS that you’re experiencing financial hardship and that it will be difficult for you to pay taxes after accounting for living expenses. Here, the IRS distinguishes mild inconvenience from severe economic disadvantage. You must be under the latter.
Apply for Innocent Spouse Relief
This applies to married couples who file tax returns jointly. While joint filing has its advantages, one consequence is that if your spouse gets entangled in a tax problem, you’re not spared. You, too, incur the financial obligation of paying off debts accrued by your spouse. That is even if you’re entirely unaware of the situation.
That is where the Innocent Spouse Relief comes in. The IRS will let you off the hook if you prove that you are indeed not liable for tax issues.
This is arguably the last resort for taxpayers in trouble. Here, it’s crucial to have expert tax representation and to peruse the Chapter 7 and Chapter 13 bankruptcy codes to know for sure if tax debt discharge will be in effect once you file for bankruptcy. Otherwise, you’ll have an even bigger financial problem with a damaged credit rating without the benefit of discharged tax debt.
Benefits of Undergoing Tax Forgiveness Program
Here are the ways the IRS debt forgiveness program can support you.
- Reduces your tax burden – Once the IRS forgives a portion of your debt, you will finally have peace of mind knowing that you can manage your tax debt better.
- Avoids the dreaded tax levy – The IRS won’t knock on your door with a warrant for the seizure of assets. You can sleep soundly at night knowing there won’t be collection attempts on your property, paycheck, or bank accounts.
- Removes liens on your property – Before a tax levy happens, a tax lien comes first. That’s where the IRS places a claim on your assets as collateral for tax debt. You can avoid having your possessions attached to a lien via the IRS debt forgiveness program.
Stay Calm and Collected
The IRS mandate is to collect taxes from people, which the government uses to fund its programs. Meanwhile, your responsibility is to ensure that the IRS gets to do its job as seamlessly as possible.
But there might be instances when you experience tax troubles and when that happens, the first thing to do is to stay calm. The next step: reach out to tax negotiation and mediation experts from Peace of Mind Tax Help. Breathe in, breathe out, and rest assured that your tax concerns will get sorted out.