When someone is unable to pay the taxes that they owe to the IRS, that person is understandably stressed out. Unexpected expenses, job layoffs, and illnesses can cause financial hardships, which make it virtually impossible for people to pay their taxes on time. If you have a tax debt you cannot pay, you may have some debt relief options. Here are three steps you can take towards IRS debt forgiveness.
Apply for an Offer in Compromise
If your financial situation is such that can to pay at least a part of your tax debt, you may qualify for an Offer in Compromise (OIC). An OIC is essentially an agreement between a taxpayer and the IRS that enables a tax liability to be settled for less than the full amount owed.
If you can pay your tax liability in an installment agreement, then you typically won’t qualify for an OIC. Some additional reasons that you might not be eligible for an OIC are if you haven’t filed all your tax returns or you haven’t made any required estimated tax payments.
Successfully qualifying for an OIC is not straightforward. The IRS considers many factors when deciding whether to accept an OIC. A crucial factor is tax collectability—when there is doubt that a taxpayer’s assets and income will suffice to cover the full tax liability, the IRS is more likely to accept an OIC. The IRS can also accept an OIC where there is genuine doubt about the correct tax debt owed.
See If You Qualify for a Fresh Start
The IRS has a Fresh Start initiative that makes it simpler for taxpayers to pay their back taxes. The Fresh Start program is best thought of as a set of four primary provisions that help taxpayers avoid a tax lien, provide more help in setting up an installment plan, increase the chances of getting an OIC accepted, and give taxpayers relief from penalties.
One aspect of the Fresh Start Initiative that helps you is that the IRS now looks at one to two years of future income to decide your reasonable tax repayment ability, which increases the chances of you getting an OIC. Previously, the IRS would look at five years of future income to determine your ability to pay your tax debt in full. Under the Fresh Start initiative, tax liens are not filed until a taxpayer’s tax debt and penalties exceed $10,000. The IRS now considers more expenses such as student loans when assessing if you qualify for an OIC.
Contact Tax Debt Experts
There’s no denying that tax debts are a tricky area to navigate, particularly when you want to reduce your tax liability. A third good option towards IRS debt forgiveness is to contact a tax debt expert experienced in negotiating partial tax debt forgiveness with the IRS. Tax debt experts have a full understanding and genuine experience of dealing with many cases of taxpayers who can’t pay their tax liabilities.
If you are unable to pay what you owe to the IRS, you may qualify for some debt relief programs. Consider these three options, all of which may offer some form of debt forgiveness.