Understanding the IRS Substitute for Return
Click to ask Mike Ask Mike The Internal Revenue Service (IRS) Substitute for Return (SFR) is a term many taxpayers
STEP 4. OPTIONS
If you're facing financial hardship and struggling to pay your tax debt, the IRS offers a temporary relief option called Currently Not Collectible (CNC) status. This process involves submitting detailed financial information to show your inability to pay. The following steps provide a guide to navigate through the CNC request.
Things you need to know:
1. Installment Agreement (IA): is a structured payment plan offered by the IRS to taxpayers who are unable to pay their entire tax debt at once. It provides a manageable way for individuals and businesses to settle their tax obligations over time. The IA offers flexibility, making it a widely used method for resolving tax debt.
2. Offer in Compromise (OIC): is an option for eligible taxpayers to settle their tax debt for less than the full amount owed. It is an initiative by the IRS to provide financial relief to those facing genuine financial hardships. The OIC program involves a detailed evaluation of the taxpayer's financial situation and a willingness to compromise on the total owed amount.
3. Currently Not Collectible (CNC) Status: is a temporary relief option that suspends IRS collection efforts for taxpayers facing significant financial hardship. While in CNC status, the IRS refrains from active collection actions. The CNC status provides a breather for those undergoing financial difficulties, allowing them time to recover.
4. Penalty Abatement: is a method to reduce or eliminate penalties associated with tax debt. The IRS may consider abatement for penalties like failure to file, failure to pay, or accuracy-related penalties. Penalty abatement provides relief for taxpayers facing penalties due to situations beyond their control.
5. Innocent Spouse Relief: protects individuals from tax liabilities resulting from a spouse's actions. It acknowledges that in some cases, one spouse may not be responsible for the tax debt created by the other. Innocent Spouse Relief offers a safeguard for individuals who may be unfairly burdened by their spouse's tax obligations.
6. Bankruptcy: is a legal process that can discharge or reorganize certain tax debts. The two common chapters for individuals are Chapter 7 (liquidation) and Chapter 13 (reorganization). Bankruptcy is a significant decision with long-term implications, and its impact on tax debts varies based on the specific circumstances.
7. Partial Payment Installment Agreement (PPIA): allows taxpayers to make smaller monthly payments, with the potential for the remaining balance to be forgiven after the agreement term. PPIA provides an option for those who cannot afford a traditional installment agreement.
8. Collection Due Process (CDP) Hearing: provides taxpayers with the right to challenge certain IRS actions, such as a Notice of Intent to Levy or a Notice of Federal Tax Lien. CDP Hearings offer a mechanism for taxpayers to dispute specific collection actions.
9. Collection Statute Expiration Date (CSED): represents the period during which the IRS can legally collect a tax debt. Once the CSED expires, the IRS cannot pursue collection. CSED provides a timeframe beyond which the IRS loses the legal authority to collect the tax debt.
10. Collection Appeal Program (CAP): allows taxpayers to appeal certain collection actions initiated by the IRS. It provides an avenue for individuals to challenge decisions related to liens, levies, installment agreement rejections, or terminations. CAP offers a formal process for taxpayers to appeal and seek a fair resolution for specific collection actions.
Important Tip: Not sure where to begin? Try our Tax Relief Finder tool. It helps you find IRS programs and gives recommendations for the best solution. Learn about our - Tax Relief Program Finder
Important Tip: Understanding the Tax-Relief process is an essential resource for individuals dealing with tax debt. It offers a road map guide, simplifying the steps needed to resolve tax-related issues- Tax-Relief Process
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Disclaimer: This is educational content, not legal, accounting, or tax advice.Â
