Every tax year the Internal Revenue Service (IRS) collects federal taxes from millions of Americans. The agency has the responsibility of processing the returns, distributing refunds, and following up with taxpayers who failed to file, pay, or both. To give you a sense of their task, in 2018, the IRS collected close to 250 million tax returns and sent out tax refunds worth nearly $400 billion.
Most taxpayers don’t start thinking about tax bills until the end of the tax year. The IRS on the other hand is working year-round. If they believe you haven’t reported enough income, underpaid, or didn’t file a tax return, they will likely take action. When they do, it’s in your best interest to have a tax relief company guiding you through the resolution process.
Tax relief services are best carried out by a certified tax relief specialist or tax pros. Working with a reputable tax relief firm gives you the best odds of settling your tax problems and moving forward from debt with minimal stress.
In this article, you’ll learn about the different programs you can take advantage of for tax relief, and how a tax relief company can help you take care of your tax payments and get on with life.
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What Is Tax Relief?
Tax relief refers to any government program or policy designed to help individuals and businesses reduce their tax burdens or resolve their tax-related debts.
Looking at tax relief at a high level it can encapsulate policies that include universal tax cuts, programs designed to benefit specific groups, and other government-driven initiatives. The child tax credit for example gives a tax break to parents of minor children, while the tax credit for green improvements pushes forward environmental goals.
These are all different forms of tax relief, and to be sure there are a lot more. However, for the purposes of this article, we’re going to focus on tax debt relief for struggling taxpayers. We’ll take a look at the different tax relief programs the IRS makes available like offers in compromise, payment plans, and penalty abatements, to name a few.
Tax Debt Relief Programs
The program was originally launched in 2011 as specific changes to the U.S. tax code to better streamline the collection process and make it easier for taxpayers to settle tax debts. For individuals and businesses that qualify, some of the programs allow taxpayers to settle for less than the total amount they owe. Although meeting the requirements to settle for less than you owe is quite strict.
The core programs offered through the tax debt relief program are the offer in compromise, installment agreements, currently not collectible, and penalty abatement. Depending on your situation you may qualify for one or a combination.
Offer in Compromise
When people think of tax debt relief they’re often thinking of the offer in compromise and hoping they qualify. In some cases, the IRS is willing to compromise with taxpayers and agree to settle a tax debt for less than the full amount. If you owe a significant debt and aren’t able to pay, the IRS offer in compromise program may be an option.
Negotiating with the IRS for an offer in compromise is a challenging and complex process. The IRS is very hesitant to grant an offer in compromise, and will only do so if you clearly show that the agency will not be able to recover the full IRS debt through other means. Working with a tax resolution specialist gives you the best odds of getting an offer in compromise approved.
Currently Not Collectible (CNC)
If you find yourself in a situation where paying the IRS would keep you from paying for your everyday living expenses you may qualify for Currently Not Collectible status.
CNC is an IRS financial hardship relief program that halts all attempts to collect your IRS debt including property and bank levies and wage garnishments. This doesn’t mean your debt is forgiven, but rather it’s a pause in the agency’s efforts to collect until your financial situation changes in such a way to allow for you to make payments.
Keep in mind the IRS will keep tabs on your financial situation as long as you’re under CNC status and if you’re able to start making advance payments they will ask you to do so and dissolve your CNC status.
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The IRS offers payment plans called installment agreements that allow taxpayers to pay off tax debt within an extended time frame. This is the most common path for tax debt relief as it’s the program that the majority of taxpayers qualify for.
The IRS will ask you how much you can afford to pay each month. They’ll encourage you to pay as much as you can to help reduce your interest and penalties. The minimum payment will be the amount you owe divided by 72.
If you can pay off your tax debt within 120 days, the IRS will waive the setup fee for the installment plan. If you’re unable to pay off the full amount within 120 days, setting up a direct debit payment plan online will cost $31, or $107 if you set it up by phone, mail, or in person.
In addition, if you’re not using direct debit, the online setup fee rises to $149, and the offline setup fee balloons to $225. If you’re a low-income taxpayer you may be able to reduce these fees.
The IRS automatically charges interest and tax penalties when individuals or businesses fail to pay taxes on time, or don’t pay at all. However, there are some circumstances when the IRS will waive the assessed value of penalties. The process of waiving the penalties is called penalty abatement.
Individuals that have experienced any of the following may qualify for waived penalties:
- You were the victim of embezzlement, theft, or other vandalism which hindered your cash flow
- You experienced a disaster such as a flood, fire, etc.
- You’re dealing with the death or serious illness of a family member
- You experienced an unavoidable absence that did not allow you to pay or file on time
- You received incorrect information from the IRS, your attorney, CPA or bookkeeper
- You suffer from chemical or alcohol dependency
- You’re dealing with divorce or other domestic problems
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Innocent Spouse Relief
IRS innocent spouse relief is a form of tax relief for some taxpayers that qualify. If you’re able to prove that your spouse, or former spouse, failed to report or underreported income without your knowledge, or fraudulently claimed deductions you can be fully relieved from that tax burden. This can come into play on a married filing jointly tax return.
Like all the other IRS tax relief programs you must meet certain qualifications in order to receive the benefits. The IRS says that you may qualify for Innocent Spouse Relief if all of the following are true for you:
- You filed a joint tax return for the year(s) in question
- The tax liability resulted from erroneous items of the person with whom you filed the joint tax return (such as unreported income or an incorrect deduction, tax credit, or basis).
- You can show that you did not participate or possess any knowledge of the existence of the understated tax
- Taking all facts and circumstances into account, it would be unfair to hold you responsible for the debt
- You and your spouse (current or former) have not transferred any property to one another in an effort to defraud the IRS
When do you Need Tax Relief Services?
There are a number of different situations taxpayers can find themselves in where hiring a tax relief company will help. A good tax relief company can be an invaluable partner, and the amount of tax resources available at their disposal can save you thousands.
Wage Garnishment Relief
When the IRS is trying to collect a tax debt they can be very aggressive. One of the most aggressive ways the IRS collects tax debts is wage garnishment. When your wages are garnished the IRS goes to your employer and starts asking for a cut of your monthly check. If your employer does not comply they’ll take action against your employer.
If you’ve been threatened with wage garnishment or are currently having your wages garnished working with a tax relief professional can stop the garnishment and get you back on track and on good terms with the IRS. The agency has a tough reputation, but for the most part if you communicate with them, you’ll be able to find a solution that works.
Tax Lien Relief
A tax lien is when the IRS makes a claim against your property, such as your home. If you’re behind on your property taxes or federal taxes the IRS may go as far as putting a lien on your home or other valuable property. A lien is the IRS saying we own this now, but they don’t actually take the property away – that’s a levy.
To avoid foreclosure, any liens on a property need to be removed and discharged. A tax relief company can help you avoid a lien if you have one pending, or help get a lien discharged if you’re currently under one.
Tax Levy Help
Unlike a lien, a tax levy is the actual seizure of your property, whether it be bank accounts or other assets like your primary residence. During a bank levy, the IRS tells the bank to hold your funds for 21 days. It’s during this time that you have an opportunity to act.
A tax relief expert can help you negotiate terms that may allow you to get some or all of the funds released. In some cases, you may need to take your case to the IRS Office of Appeals or negotiate an installment agreement. If you haven’t yet been issued a levy but know it’s pending you need to be thinking about strategies to avoid it.
Unfiled Tax Returns
The IRS expects everyone to file a tax return each year despite whatever circumstances you may be dealing with in life. When you forget or can’t, the IRS will make an estimate of how much you owe based on documents it received like 1099s and W-2s.
If you have unfiled tax returns the best thing to do is file them to avoid further penalties. A tax resolution company can help you file your unfiled returns and help you make a plan to avoid dealing with the same situation in the future.
Help With Paying Back Taxes
When you owe back taxes, it’s often impossible to pay the tax in a lump sum. A big part of working with a tax relief specialist involves looking over your returns to ensure that you’re in fact responsible for all of the unpaid taxes. If the tax bill is accurate, a tax expert can work with the IRS to put together a payment plan to make paying the taxes more manageable. Once you’re on a payment plan with the IRS they consider you to be in good standing and the penalties and collection efforts will cease as long as you stick to the agreed-upon plan.
Receiving an audit notice from the IRS can make your heart skip a beat, but there’s no need to panic. The audit process can feel intimidating at first, but it’s not something you need to navigate on your own. The IRS initiates audits for a range of reasons, and just because the IRS begins an audit it doesn’t mean you’ve actually done anything wrong. A tax relief company can work with you to put together an audit defense plan to ensure the audit will be accurate and fair.
When you think about how the IRS sorts through hundreds of millions of tax returns each year it would be shocking if they didn’t make a mistake from time to time. The reality is the IRS does make mistakes. Not often, but they do happen. They may think you made more money than you actually did, get your adjusted gross income wrong, mix up a taxpayer identification number, or include income from an ex-spouse or former business partner with your income.
When the IRS makes a mistake, you have the right to protest and get the mistake remedied. A tax relief specialist can help you review your transcripts and confirm if a mistake has been made or not. If it’s a confirmed mistake, they can work with you to file the proper paperwork to fix it.
Working with a Tax Debt Relief Company
When you’re behind on tax payments and the internal revenue service keeps sending you letters it can feel like you’re never going to get back to normal. An experienced tax relief company can evaluate your unique circumstances and recommend the path that will lead to the best outcome possible.
20/20 Tax Resolution are nationwide go-to experts when it comes to IRS tax relief help. 20/20 Tax Resolution has helped over 32,000 businesses and individuals reach successful resolutions with their IRS and state tax liabilities.