It can be scary when your tax debt is overwhelming. Owing IRS taxes can breed a series of problems regardless of whether you earn a little or you earn a lot. The worst case is that when failing to settle your tax debts early, this can become bigger to an extent that you might not be able to afford the amount eventually. Do not be afraid if your taxes are threatening you. There are various tax debt relief options that can help you resolve your back tax problems.
Offer in Compliance
You will be able to settle tax debts for an amount that is less than the owed amount with the program. You must however, show that you are truly incapable of paying the full tax and doing o can result in a financial crisis before you can qualify for this program. Some of the factors being considered for your qualification include your income, expenses, ability to pay and asset equity. First check your eligibility before you apply for this program. In the event you have an ongoing bankruptcy proceeding, then you may not be eligible for Offer in Compromise program. Those who opt to hire professional help to help them file the offer should first check their qualifications. If your application is accepted, then be sure to meet all the terms provided in Section 7 of Form 656. This includes making all payments and filing required tax returns. For a rejected application, you can make an appeal within 30 days. Form 13711 allows you to request an appeal for Offer in Compromise.
Look for Tax Deductions
A dollar amount that the IRS allows you to subtract from your adjusted gross income or AGI, making your taxable income lower is known as tax deduction. The lower your taxable income, the lower your tax bill.
IRS Tax Forgiveness Program
It is easy for you to qualify for Offer in Compromise or installment programs with this program. Programs like Fresh Start and Student Loan Programs are provided by IRS to help taxpayers settle tax debts for a small amount of the total liability. You will be paid a percentage of the total debt depending on your financial status with this programs. Factors such as your future one-year income potential down from 4 years will be evaluated. Some Allowable Living Expense calculation formula that factors in your bank charges, credit card payments among other allowances have been come up with.
Penalty and Interest Abatement
Although it is not very common, this program is offered by the Internal Revenue Service to help individuals who’ve shown they are in serious financial troubles and can’t pay their taxes. Tax penalties are abated and you are given relief for failing to file your tax returns on time or to deposit taxes.
Filing for Bankruptcy
Chapter 7 of the Bankruptcy Code allows you to relieve yourself from income tax debts. But again, filing for bankruptcy will be an option only if you qualify for the requirements to be discharged from tax debts. Chapter 7 can provide you up to full discharge of all your allowable debts. Chapter 13 can also give you tax relief but you may need to repay some as it discharges some debts.
Not Currently Collectible
They voluntarily agree not to collect taxes for about a year or even more with this IRS program. What this means is that you have no ability to paying your tax debts. They will only do so after your financial condition has been confirmed. This is useful and it enables you to file for an appeal to stop a lien, levy, denial, seizure or even termination of the installment agreement. The appeal enables you to explain how the situation can be resolved without forceful seizures or levies.
This program classifies various types of income as either taxable or tax-free. It reduces the amount you report as your gross income. When your income is excluded from being taxed, then it will not show up on your tax return and in case it shows up then it will come in another return section. Some incomes may be excluded not just because they are hard to measure but to encourage you to participate in various activities.
This is not like tax deduction that reduces the amount of your income subjected to tax, it gives you more savings by reducing your tax bill from dollar to dollar. You can apply it to the amount you owe after making all the deductions from your taxable income.
Tax debt can be related to any type of debt. It can deprive you of enjoying a smooth financial life. However, tax debts should not be the source of your miseries even if you earn less. Programs and tax debt relief options such as tax credit, offer in compromise, tax deductions, bankruptcy, not currently collectible and tax forgiveness among others can help you resolve most of your tax woes