What is the IRS Debt Forgiveness Program?
Many people are struggling to pay their taxes, this is a simple fact of life. That is why the IRS introduced several means of tax relief services, one of which is the IRS Debt Forgiveness Program. This program allows taxpayers that simply cannot afford to pay their taxes some more breathing room. That being said, not everyone can qualify for the program, and the IRS is extremely reluctant to forgive taxes in the first place. In this article, we will explain what this program is, how it works, and who can qualify for it.
What is the IRS Debt Forgiveness Program?
The IRS Debt Forgiveness Program presents taxpayers with several options to catch up on their unpaid taxes. The options are:
- Installment agreements
- Offer in compromise
- Currently not collectible (CNC) status
- Innocent spouse relief
Installment agreements are the most common form of tax relief, where taxpayers can pay their taxes in installments as opposed to paying them outright. The typical period that the IRS allows is around 72 months, and you can’t owe less than $50,000 in combined tax penalties and interest. Do note that even if the IRS accepts your installment plan, you will still accrue penalties and interests until your obligations are repaid in full.
Offer in compromise (OIC) is an actual form of tax forgiveness, as it means that you will be paying less than what you owe. Needless to say, very few taxpayers are eligible for this option, and the IRS “doles out” OICs rather sparingly.
The CNC status is a great option for those taxpayers that can prove their inability to pay back their tax debt. It means that the IRS will stop collecting taxes from you until you “get back on your feet”.
Lastly, the innocent spouse relief offers some taxpayers the option to avoid penalties that they knew nothing about, such as tax fraud or any tax inaccuracies.
Most people will be able to get an installment agreement from the IRS but OIC and CNC are reserved only for those that simply cannot afford to pay their taxes.
How does it all work?
Your financial situation is the deciding factor when it comes to debt forgiveness. If you have the means to pay your taxes, you will not be able to get the IRS to accept any offer, simple as that. But if you do, you will need to go through the following process:
- Application and acceptance to the correct program
- Agreement to stay current with your tax returns in the future
- Agreement to all the terms that IRS stipulates
- Periodical reassessment of your financial status
- Paying off the entire tax amount, either via a payment plan or one lump sum
Based on your financial situation, as well as the circumstances of your tax debt, the IRS will determine exactly how much you need to pay. But not everyone can qualify for the IRS Debt Forgiveness Program.
Who can qualify for the IRS Debt Forgiveness Program?
If this is your first time looking into tax relief, you might want to talk to an expert. But, in essence, if you have a financial hardship that is preventing you to pay your taxes, there is a good chance you qualify for at least one tax relief situation. That being said, the IRS takes note of a few factors, such as:
- Tax balance
- Income cap
- A drop in net income
Your tax balance needs to be below $50,000 for you to be able to qualify for a tax forgiveness program. Furthermore, you can’t have more than $100,000 in income if you are filing alone, and $200,000 if you are filing with your spouse. Lastly, your drop in net income needs to be at least 25%, if you are self-employed.
If you satisfy the above factors, there’s a good chance that the IRS will accept one of your offers. Do note that the IRS will require you to disclose all your financial information.
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Will the IRS forgive my tax debt?
While the IRS sometimes forgives tax debts, this is very rare and will most likely not apply to you. The best you can think to accomplish is to avoid penalties and interests on your tax debts. But if you can prove extreme hardship, the IRS is able (and willing) to provide you with tax debt forgiveness.
But if you are simply trying to reduce your tax amount, chances are that the best offer you can get is an installment agreement. The IRS accepts almost all of these agreements. However, you will still need to pay your taxes in full, with accumulating interests and penalties. The only taxpayers that can get their taxes actually “forgotten” are those that simply cannot pay their tax debt by any means. Otherwise, the IRS will still want its due.
How do I know if I qualify for the IRS Debt Forgiveness Program?
The best place to start is either by contacting a tax expert or by visiting the IRS website. Basically, you will either be hiring someone to check into your finances, tax debt, available options, etc., or you will do the work on your own. It is not impossible to get the IRS to accept an Offer In Compromise on your own, but you may need to do extensive research for it to happen. Luckily, you have all the required information readily available. With some time, you will be able to figure out whether you qualify for the IRS Debt Forgiveness Program or not.
Regardless of your choice, you can find all you need by browsing the Consumer Opinion Guide. Explore our knowledge database and, given enough time, you can become a tax expert of your own! Or, at the very least, you will be able to find all the top tax relief companies to help you out!