What is Tax Relief?
Many individuals experience tax problems within their lifetime. These tax issues can seem overwhelming, especially if you have fallen behind on filing your taxes or you have gone into collections. Individuals with unfiled taxes or have been audited by the IRS should look into tax relief services that can help resolve their tax issues. Tax relief can help those who have gone into collections or fallen behind in their taxes by setting them up on a payment plan or by negotiating with the IRS. When you have an unpaid balance to the IRS, you risk bank levies, wage garnishment, and possibly interest or penalties on the unpaid balance owed. We at The Tax Defense Group can help you relieve your tax payments and settle your tax balance.
Tax Relief Options
There are many options for individuals who owe money to the IRS to resolve an unpaid balance. Here are four common options for individuals who owe money to the IRS:
1. Installment agreement
If you do not have the ability to pay off your balance right away and need an extended period of time to settle your balance, the IRS will typically create a payment plan or installment agreement. Individuals who have a tax balance of over $25,000 or businesses that have balances over $10,000 are required to use direct debit or an automatic withdrawal from your bank account.
2. Offer in Compromise
If you are going through a large financial hardship, the IRS may re-evaluate your tax balance and possibly have you pay less than what you owe. This process is known as Offer in Compromise. The IRS gives this option to tax payers only when an individual has proven that they are unable to pay their debt or there was an event that created relevant financial problems. The IRS may then reduce the individuals tax balance and re-evaluate their amount owed. The IRS looks at the following factors when deciding if an individual qualifies for an Offer in Compromise:
- Your income and expenses.
- Any assets you may have.
- Ability to pay.
3. Currently Not Collectible
If you are unable to pay your tax balance owed to the IRS, and there is no way for the IRS to collect the money you owe through tax resolution, you can file for “Currently not Collectible” status.
This “Currently not Collectible” means that the IRS will not be able to collect any taxes you owe or charge penalty fees if:
- If your tax statements show that your financial situation has improved enough, the IRS will start the collection process once again. However, if the ten year statute of limitations expires whileyou are still in the “Currently not Collectible” status, your tax balance will become permanently not collectible and no tax resolution or payment will be needed.
- Your wages barely cover your living expenses so there is no income the IRS can garnish.You have no assets that the IRS can levy. Remember, the IRS can not seize or levy assets that you own if you have less than 20% equity in the item.
It helps if you have nothing to give the IRS for it can help with your tax balance owed. If your account is deemed to be uncollectible, the IRS will halt the collection process until your financial situation improves and a better tax resolution option becomes available. Interest and penalties will continue to grow and you will continually have to prove each year that you are still unable to pay your tax balance.
4. Penalty Abatement
If you have not paid your taxes on time and are facing penalties, you may be able to get them removed through penalty abatement or a penalty adjustment. The elimination of an assessed tax liability is abatement. An adjustment is just a reduction or alteration of it. In many cases, you may even avoid penalties and get your interest refunded.
5. Request for an Extension
If you have the means to pay the balance in full but require time to gather the money, the IRS will allow a request for a one-time extension. The request allows up to 120 days to pay the tax balance in full. The IRS will apply a 0.5% penalty per month of unpaid balance. If the extension date is missed, the IRS will place you back into collections.
Tax Relief in Disaster Situations
Those who have been affected by natural disasters such as hurricanes, floods, wildfires, pandemics, earthquakes, and more could be entitled to special tax relief. Victims could qualify for payment extensions and may possibly claim casualty losses on federal income tax returns.
Coronavirus Tax Relief
As part of the U.S. government’s ongoing response to the Covid-19 pandemic, some tax rules have changed, and new coronavirus tax relief initiatives may be available.