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tax debt relief options

Explore Your Tax Debt Relief Options

August 13, 2021

For most people, the stress of owing back taxes can be overwhelming- especially if you’re unable to pay. Ignoring the situation, however, will only make things worse. The IRS will not turn a blind eye to your tax debt. It will continue to send demands for payment and eventually place you in collections. This means your paycheck, bank accounts, and even your property could be at risk. Before things escalate to that level, it’s important to speak with a tax professional and explore your tax debt relief options.

Penalty Abatement

When you fail to file or pay your taxes on time, the amount you owe will grow due to penalties and interest fees. In certain situations, the IRS will waive or reduce these fees if you can prove reasonable cause for the delay. Penalty relief is typically granted if you’ve experienced a serious illness or were unable to file due to a natural disaster. You may also be eligible for First-Time penalty abatement if you’re current on all tax filings, you’ve made arrangements to pay your tax debt, and you haven’t been penalized (or weren’t required to file) during the previous three years.

Installment Agreements

The IRS offers various types of payment plans (also known as installment agreements) to help you pay your tax debt off over time.

Short-Term Payment Plan

You can apply by phone, mail, online, or in-person. If approved, you’ll have up to 180 days to pay your tax debt in full. There are no set-up fees with short-term payment plans.

Long-Term Payment Plan

Need more time to pay? A long-term payment plan may be the better option. You can stretch payments out over several months or years. Set-up fees, however, are required.

IRS Streamlined Installment Agreement

Do you owe less than $100,000? You may be able to get a 60-month payment plan, or longer, and bypass the Collection Information Statement.

Partial Payment Installment Agreement

If IRS does not believe that you will be able to pay your tax debt ($10,000 or more) before the statute of limitations expires, it may approve you for a partial payment installment agreement. You’ll have to make monthly payments but you’ll pay less than the total amount you owe.

Offer in Compromise

An Offer in Compromise (OIC) is an agreement between you and the IRS to settle your tax debt for less than you owe. The IRS may accept your OIC if paying your tax debt in full will cause extreme financial hardship. Before you can apply, however, you must be current on all tax filings.

Currently Not Collectible

If your expenses outweigh your income, and you don’t have any assets available to cover your back taxes, the IRS may place you in a Currently Not Collectible (CNC) status. This gives you a temporary reprieve from making any payments on your tax debt. Your financial situation will be reviewed annually. If it improves, you will be expected to make other arrangements to satisfy your overdue taxes. Once the statute of limitations runs out, however, any remaining balance will be forgiven.

Innocent Spouse Relief

In situations where a spouse (or ex-spouse) has left you holding the bag for taxes that aren’t yours, you may qualify for Innocent Spouse Relief. There are, of course, certain things you’ll need to prove before the IRS lets you off the hook, such as:

  • You had no knowledge of the tax debt;
  • Your spouse was responsible for the tax debt; and
  • Holding you accountable for your spouse’s actions would be unjust.

Although you can apply for these tax debt relief options on your own, many have very complex rules and requirements. We highly recommend contacting a tax professional to discuss the specifics of your case before deciding which is best for you. At Tax Assistance Group, our team of dedicated tax specialists can help you find the best solutions for your tax problem. Give us a call today!