4 tax-relief options to reduce your tax debt

Dealing with the Internal Revenue Service (IRS) and their relentless pursuit of back taxes can be a daunting experience. The IRS employs an array of methods to collect outstanding tax debts, including levying your assets, placing liens on your income, and employing various other means to recoup what you owe to the government. However, there is hope for individuals struggling with mounting tax debts. In this comprehensive guide, we will explore four effective tax debt relief options that can help you regain control of your financial situation and find respite from the relentless pursuit of the IRS.

Offer in Compromise (OIC): A Path to Negotiated Settlement

When you find yourself unable to pay the entirety of your IRS tax debt, the Offer in Compromise (OIC) program may provide the relief you need. This program allows you to submit an offer to the IRS to settle your tax debt for a reasonable amount that takes into account your current financial resources and assets.To initiate an OIC, you must prepare and submit the necessary forms, fees, and supporting documentation to the IRS for their review. It’s worth noting that the IRS accepts less than half of the OICs submitted each year, making it crucial to seek professional assistance to enhance your chances of success. Tax professionals can help you assess your qualifications, navigate the program’s rules and requirements, and prepare a compelling case for your OIC.

Payment Agreement: Gradual Debt Resolution

If your OIC application is declined or you are unable to pay your entire tax debt in one lump sum, you can explore the option of requesting a payment agreement from the IRS. The IRS offers both short-term and long-term payment agreements, allowing you to make manageable monthly payments based on your current income.It is imperative to meet your monthly payment obligations punctually and in full under this arrangement. Failure to do so could lead to the IRS demanding full payment of your outstanding debt or even the rejection of future payment agreements.

Currently Not Collectible (CNC) Status: Temporary Relief for Financial Hardships

Individuals with limited income and few assets may qualify for Currently Not Collectible (CNC) status, a temporary relief option offered by the IRS. CNC status allows you to temporarily postpone making tax payments until your financial situation improves. However, this option may not be available if you possess valuable assets such as stocks, insurance policies, or other items that could be liquidated to settle your tax debt.While your tax debt remains in CNC status, it will continue to accrue interest and penalties, gradually increasing the overall amount you owe the IRS. Additionally, the IRS may withhold your tax refunds in future years to offset your tax debt. You will be expected to repay the debt once your financial situation stabilizes, and the IRS will periodically assess your financial status to determine your ability to make payments.

Penalty Abatement: Relief from Tax Penalties

The IRS frequently imposes penalties on delinquent tax debts, which, when combined with the actual tax owed, can become a substantial financial burden. However, there is a provision for penalty abatement for individuals who can demonstrate that they made reasonable efforts to comply with tax laws but faced circumstances beyond their control.You may be eligible for penalty abatement if you:

• • Received erroneous advice from an IRS agent, tax preparer, or advisor.
  • Faced circumstances that prevented you from obtaining necessary records or filing on time.
  • Experienced a disaster such as a tornado, fire, earthquake, or flood.
  • Do not have prior years’ tax penalties to repay.

To request penalty abatement, you must ensure you are current in filing your tax returns for the previous three years and have either paid or are current with all prior years’ tax debts.

In a financial landscape where meeting IRS tax obligations can be challenging, understanding and utilizing these four tax debt relief options can make a significant difference in your ability to regain control of your finances and alleviate the burden of unpaid taxes. Each of these strategies presents a unique opportunity to negotiate with the IRS and work towards a more manageable tax debt resolution. By exploring these avenues and seeking professional guidance where needed, you can take meaningful steps toward securing your financial future and achieving tax debt relief.