Tax Relief
With the end of pandemic era tax relief programs, the IRS refund you were expecting this year may have turned into a debt. If that is you, it is important to know you can get tax relief – including wiping out your debt entirely.
More than 10 million Americans owe over $114 billion in back taxes, according to the most recent IRS figures.
Do not Ignore Tax Debt
Ignoring a tax obligation is like ignoring a tumor – things do not get better over time.
If you owe money but do not file a return, you face several IRS penalties. First, you could be hit with a 5 to 25 percent monthly interest penalty on the amount you own. In addition, for 2023, if you file 60 days late, you will have to pay the lesser of $450 or the total tax owed.
If you owe money and can not pay – you may save on penalties by filing anyway.
The first step the IRS takes in trying to collect unpaid taxes is to send you a letter showing how much you owe and calling for you to pay the bill. Ignore this letter at your own peril. From there, the agency can take stronger actions that include penalties and interest in addition to property liens, a bank levy in which the IRS can take money from your accounts, and wage garnishment.
Jail time is not usually an option unless you are a really bad guy. Think Al Capone.
Fresh Start Tax Relief
If you are not an Al Capone type, you might be surprised to find that the IRS has a program to help you resolve back tax issues.
In 2011, the IRS launched its fresh start program to reduce or eliminate tax debt. The next year, the program was expanded to make it available to more taxpayers.
The cornerstone of the program is that it prohibits the IRS from collecting more than a taxpayer can afford. However, you must demonstrate that your income is too stretched to allow you to pay.
Under the fresh start program, the IRS may take into account unique financial situations, such as unemployment, and high student debt.
How to Qualify for Fresh Start Tax Relief
Income is not considered when applying for Fresh Start. However, there are other qualifications, including that you must::
- have filed tax returns for the previous three years
- owe less than $50,000 in taxes, interest, and penalties
- commit to paying your taxes owed within six years
- have made all required estimated tax payments for the current year
- Have not committed tax evasion or fraud
Once you are qualified, there are a number of options you can employ to lower or eliminate your tax bill.
Installment Agreement
As the name suggests, installment agreements allow you to pay a portion of your taxes monthly until the debt is resolved.
You may be able to negotiate the amount you pay each month in setting up this agreement. However, interest may continue to accumulate. Conversely, no new penalties will be assessed and the IRS will stop sending you collection letters.
Offer In Compromise
You may be able to reduce the tax you owe through an offer in compromise. This option allows you to propose a payment that is lower than what you owe.
Do not think you can just fill out a form and eliminate your tax obligation. You need to base your offer on the challenges of your financial situation.
Other tax relief options include obtaining a financially favorable IRS status.
Currently Non-Collectible Status
Having your tax debt placed in the IRS’ currently non-collectible status does not reduce or eliminate the taxes you owe. However, it does halt the agency’s collections actions such as liens, bank levies, and wage garnishments.
This status is reserved for taxpayers who can not afford to pay their taxes. You need to meet the qualifications for the fresh start initiative to be eligible for this status
Penalty Abatement
Finally, as the name implies, penalty abatement offers the possibility of reducing or eliminating IRS fines. The IRS offers several ways to apply for this program.
Read More:
- Get Organized: A Bullet Journal Tracker Can Change Your Life
- Inexpensive Ways to Get Organized
- Simple Bill Paying
Come back to what you love! Dollardig.com is the most reliable cash-back site on the web. Just sign up, click, shop, and get full cashback!
Max K. Erkiletian began writing for newspapers while still in high school. He went on to become an award-winning journalist and co-founder of the print magazine Free Bird. He has written for a wide range of regional and national publications as well as many on-line publications. That has afforded him the opportunity to interview a variety of prominent figures from former Chairman of the Federal Reserve Bank Paul Volker to Blues musicians Muddy Waters and B. B. King. Max lives in Springfield, MO with his wife Karen and their cat – Pudge. He spends as much time as possible with his kids, grandchildren, and great-grandchildren.
Comments