If you’re reading this, chances are that the IRS has contacted you regarding back taxes and you are already in despair for a tax debt relief negotiation.
The IRS is one of the most dreaded federal organizations in the United States of America. It has a reputation for being ruthless and powerful, which means it can dole out heavy punishments for those who don’t comply with its tax laws. Nevertheless, you don’t have to suffer alone if you find yourself in debt to the IRS. There are ways to release one’s situation from tax liability once and for all—but you’ll need to be prepared with information about how it works so that you can make smart decisions about your finances along the way.
With this guide’s help, you will better understand your tax condition and how to liberate yourself from this burden.
Collect the Necessary Documents
The first thing to know about IRS debt is that it can be incredibly stressful and overwhelming. You may have received several letters from the IRS or even an official summons demanding payment of thousands of dollars and quickly! You might have been told that if you don’t pay up within a specific timeframe (usually 30 days), there will be serious consequences like wage garnishment, property liens, and/or seizure by law enforcement agencies. This can be alarming because nobody wants their wages garnished or their car repossessed!
The next move is to gather the necessary paperwork. The IRS needs proof of your income and expenses, so be prepared to produce the required forms and paperwork for all sources of employment, bank statements for all accounts, copies of checks made payable to you in the past year, and other documents showing your income or expenses.
The IRS will also request pay stubs from any sources of earned, such as unemployment compensation and workers’ compensation may be considered earned income. If you receive any of these economic benefits, give copies of your most recent check stubs or statements from when the money was deposited into a personal bank account.
Determine the Type of Debt You Owe
When indebted to the IRS, you could be saddled with two types of debt: tax debt and tax penalty. Tax debt is the amount owed to the IRS due to your failure to pay taxes on time. A tax penalty is imposed by the IRS for failure to pay taxes or other violations of tax laws. Any amount owed to the government should be considered “debt.”
Assessment of Tax Situation
The IRS assesses your situation based on the information you provide, as well as the knowledge they already have about you. To begin the process of getting your revenue claim resolved, it is critical to assess your situation. This consists of identifying:
- How much you owe
- Your income level
- Your assets, liabilities, and expenses (including any other taxes owed)
- Your payment history with the IRS
If you do not provide enough information or if the information you provided is inaccurate, the said government agency may contact you for more information or impose penalties on your tax return.
Understanding the Various Tax Debt Relief Programs
Various tax relief programs are available to help taxpayers pay their back taxes. You may be eligible for one or more of these programs depending on your financial situation and the debt you owe. The IRS offers several different types of relief that can help you get out from under your tax debt, including:
- Offer in Compromise
- Penalty Abatement
- Installment Agreement
Fresh Start Initiative Program
The Fresh Start Initiative (FSI) is a streamlined approach to debt resolution created by the IRS. It allows taxpayers who owe back taxes to resolve their debt for less than they owe, giving them more options for payment plans than traditional means. The FSI’s goal is to settle your back taxes quickly and avoid litigation in just 60 days.
People who are eligible for this program can receive:
- a reduction of penalties and interest on their tax debt
- restructuring of their debt into an affordable monthly payment
- a fresh start on taxes, so they won’t have to pay any more than what they owe for the current tax year.
Offer In Compromise
An Offer in Compromise (OIC) is a settlement offer to the IRS. It’s a payment plan that allows you to repay your debt over time. This is a good option if you can’t pay the total amount of your tax debt but you want to avoid bankruptcy or wage garnishment. You may qualify if you cannot pay your tax debt because of financial hardship and/or low income.
The IRS requires you to submit an application for an OIC arrangement with all the necessary documentation before they will consider it. The IRS will assess your income and expenses, as well as those of your spouse, if applicable.
Penalty Abatement and Negotiation
The IRS penalty abatement program is a tax debt relief option that allows taxpayers who can’t pay their tax bills to get rid of penalties and interest. The program is intended for those who need temporary relief from their debt, not permanent forgiveness. It’s also important to consider that the IRS will not remove all penalties when they decrease your liability. They’ll only give you partial assistance if your circumstances allow it.
An installment agreement is an agreement with the IRS to pay your tax obligation over time. When you enter into an installment agreement, you’re essentially saying that you can afford to pay back a portion of your outstanding tax balance each month until it’s paid off in full.
Suppose you are struggling financially and need help making payments on your account; this might be a good option for getting started while still working on finding funds elsewhere (like applying for an extension).
Get Help from a Tax Expert
If you are facing high amount of tax claim, it is important to know that resources are available to help. Tax experts can assist with completing paperwork, negotiations, and working with the IRS. You need to find a qualified tax professional familiar with the process of getting rid of tax liability. The initial step in this process is deciding which option suits your financial situation.
It’s time to get started on taking care of your taxes now!
If you can’t pay your tax bill, there are options for tax debt relief.
If you are stuck in a situation where you cannot pay your tax bill, there are options for IRS tax debt relief.
It’s important to understand that simply because you’re struggling with paying off an outstanding debt doesn’t mean it won’t ever get paid off if left alone. Most people who have unpaid taxes will eventually pay them off without being required by the IRS or any other agency. However, this process could take several years if you cannot settle your tax bill voluntarily. Eventually, your tax liability will build up more than initially owed due to penalties and interests.
The IRS can be scary, but we hope this guide has helped you understand the different tax relief types and your options. If you feel overwhelmed by your debt situation or want to learn more about how a tax expert can help reduce or even eliminate your tax bill, contact us today and avail of our complimentary consultation!