If you have tax debt that can’t repay, you might qualify for forgiveness of some IRS debt through tax relief. The IRS offers several programs to help taxpayers in need of financial assistance to pay tax debt. We can determine if you qualify for tax debt relief programs and can help you get signed up.
Here are the answers to frequently asked questions about IRS debt forgiveness.
What Is IRS Debt Forgiveness?
IRS debt forgiveness refers to several tax relief programs offered by the IRS to help taxpayers resolve their back taxes. Some tax debt relief programs forgive IRS debt. Others temporarily suspend IRS collections during a period of hardship or allow for repayment in monthly installments.
What Are the IRS Debt Forgiveness Programs?
The IRS offers several tax debt forgiveness programs. These are the most common ones:
Offer in Compromise (OIC)
With an Offer in Compromise, the IRS accepts a lesser offer amount than the total back taxes owed. For instance, if someone owed $50,000 in back taxes but got approved for an OIC, the IRS might agree to settle the tax debt for $25,000. IRS Offer in Compromise calculations are specific to each taxpayer’s personal financial situation and consider income, assets, and expenses. Depending on OIC agreement terms, the IRS might require a lump sum payment of the Offer in Compromise amount. In some cases, the IRS might allow the taxpayer to make monthly OIC payments.
IRS Payment Plans / Installment Agreements
An IRS installment agreement is a payment plan in which an individual with back taxes makes fixed regular payments, usually monthly, toward their tax debt rather than paying it all at once. IRS payment plans are popular among taxpayers who can pay what they owe the IRS over time. The monthly payment amount in an IRS installment agreement is determined by the total tax debt amount as well as the taxpayer’s income and other financial obligations.
Currently Not Collectible (CNC)
Currently Not Collectible, or CNC, is a temporary IRS debt relief status in which the IRS agrees not to collect back taxes while an individual works through a period of financial hardship. When IRS debt is in CNC status there won’t be federal tax liens, IRS levies, or wage garnishment. You’re protected until Currently Not Collectible status is lifted.
Innocent Spouse Relief
Innocent spouse relief protects an individual from back taxes, plus interest and penalties, if their spouse had unreported or incorrect items on a tax return. With innocent spouse relief requests, the IRS determines how much of the back taxes amount you are responsible to pay.
What Is the Fresh Start IRS Debt Forgiveness Program?
The Fresh Start Program includes many IRS tax debt forgiveness options (listed above). It creates a simple, streamlined way for taxpayers to apply for IRS debt relief. When a taxpayer is approved for a Fresh Start and demonstrates good faith in adhering to the terms of their agreement, they can even have tax liens and other penalties removed.
How Does IRS Debt Forgiveness Work?
The IRS reviews an individual taxpayer’s financial circumstances and determines the type of tax debt forgiveness or relief for which they are eligible. A taxpayer with a severe and likely long-lasting financial hardship might qualify for an OIC. Another taxpayer with a temporary setback might have their tax debt placed into CNC status until they get back on their feet.
Someone receiving a regular paycheck but struggling to pay back taxes all at once will likely be offered the option of setting up an installment agreement.
Who Is Eligible for IRS Debt Forgiveness?
Any taxpayer struggling to pay back taxes might be eligible for IRS debt forgiveness. Wiztax can help you with tax relief services for back taxes and find the best IRS tax debt forgiveness program that gives you the most relief from your tax situation.
How Do I Find Out If I Qualify for IRS Debt Forgiveness?
Schedule a free call with us so we can review your situation and tell you what your options are. We never charge for ‘consultations’ or ‘investigations’.
Does the IRS Ever Completely Forgive Tax Debt?
The IRS rarely forgives the full tax debt amount. However, if you are suffering a genuine financial hardship, you might be entitled to significant IRS tax debt relief as discussed above.
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