Do you have a tax debt for this year? You are not alone as there is a huge percentage of taxpayers that their withheld taxes cannot cover their total tax bills. If your tax debt is huge and you don’t have enough money to pay it, you can find yourself in a very difficult situation. The tax authority can impose a penalty or fine on your tax bill and that will make your tax debt grow bigger. The only solution you have is to consider tax relief. How does it work? Here is all you need to know.

What is tax relief?

Tax relief is simply negotiating with the IRS for a perfect payment plan or settlement for your tax debt. Many people think that it is about erasing the tax debt, but it is a process of making it easier for you to take care of your tax obligations. However, in some instances it can help lower the tax debts or even have the tax debt forgiven when you meet certain set out terms and conditions.

How does tax relief work?

If you can’t afford to pay your taxes in full when they are due, you have several relief options. Here are 3 methods to consider;

• Offer in compromise

If you can’t manage to pay your tax bill in full because of financial challenges, the IRS might lower your tax bill through offer in compromise. However, before the IRS lowers what you owe, they must review your expenses, ability to pay, your assets and your income. That way, they will have a clear picture of your income and then make a fair decision based on the facts.

• IRS repayment plan

The IRS is a fair institution that knows at times you can’t pay what you owe in full at once. For that reason, the tax agency allows you to file an installment payment plan to clear your debt. You can consider a short or long-term payment plan. You just need to negotiate for a perfect payment plan that will not put you under financial pressure. If you file for repayment plan early enough, you might not pay heavy fines or interest.

• Interest abatements or penalty relief

The IRS sets out criteria on which you can get a penalty relief. For instance, if you filed a repayment plan early or you haven’t been fined in the last three tax years for not paying your tax bill, you can get a penalty relief. Also, although rare, you can get forgiveness on the interest you owe for unpaid tax bill. With a good tax attorney on your side, you can negotiate for interest abatement.

Can you get IRS debt forgiven?

Yes, the IRS can forgive your tax debt if you can’t pay and when collection action would force you into a financial crisis. Also, in some situations, the IRS can partially forgive your debt; meaning you will have a reduced tax debt that you can comfortably pay. A decision will be made, based on your current financial situation.

Can you negotiate for an installment payment plan on your own?

Yes, you can. However, it is highly advisable to hire a tax attorney or certified public accountant to negotiate a repayment plan with the IRS on your behalf. A tax professional will represent you in the best way possible and get you a perfect repayment plan, and get IRS off your back.

Final Words

At one time or the other, you can find yourself having a huge tax liability that you can’t pay in full at once. When that time comes, consider tax relief options like offer in compromise, installment payment plans and others. That way, you will have an easy time to pay your tax bill or your tax bill will be forgiven by the tax authority.

If you let your taxes get out of control, you risk collection actions such as wage garnishments, asset seizures, among others. However, no matter your tax situation, there is always a way out to fix your tax problems. If you get a tax notice from the IRS, you should not assume the notice. You should respond by either paying the taxes owed or if the debt is huge, you should think of filing an installment agreement plan. Learn more about tax relief options here.

What are tax relief solutions?

Before we look at the tax relief options available to taxpayers, it is important to have a clear understanding of what tax relief options are. These are solutions available to taxpayers who have huge unpaid tax debts. The solutions aim to help you negotiate with the IRS to forgive or reduce your tax debt. Also, there is an option to spread out what you owe and pay in installments. Here are the solutions.

• Partial pay agreement or installment payment plan

If you owe a lot of money to the IRS, you are likely to have complex tax problems that can be costly. A huge tax debt can get you into more debt as a result of interest and penalties. You can avoid that by making a minimum monthly tax payments or negotiate for a tax payment plan with the tax authority. With the help of a tax expert, you can negotiate the amount you can pay every month. The interest and penalties will continue to accrue, but you can obtain penalty abatement. You just need to be reasonable and that can save you big money in the name of penalties.

• Offer in Compromise

If you are in a difficult financial situation and can’t pay the full amount of taxes you owe the IRS, you can consider offer in compromise.  This option offers you a chance to pay lesser tax bill. However, it is not easy to obtain a successful offer in compromise, but with the right strategy, yours can go through. The taxing authority will assess your assets, income, expenses and overall financial situation before rejecting or accepting your request.

• Penalty abatement

One thing you need to understand is that your tax bill can double or even triple depending on how long you take to pay up. However, if you have a valid reason that made you delay to make your payment, the IRS can forgive you some or all of the penalties. If the IRS had an error or you were involved in serious accident that left you injured or disabled, the IRS may consider your penalty abatement request. The reason for late or delayed payment must be ‘reasonable’.

• Amending your tax return

If you have not been serious when filing your tax returns, you can be missing a lot when it comes to tax deductions and credits. If you take advantage of the tax exemptions, credits and deductions, your tax bill can be lesser. Therefore, if your tax bill is a bit high, you can consider to amend your tax return to ensure your tax liabilities, credits, and tax credits are well taken care off. That way, you can bring down your tax bill if you had missed some tax credits and deductions.

• Audit defense

If you are facing a tax audit from the IRS, you need to have a good tax attorney. The attorney will ensure that your interests and rights are protected, and that can prevent IRS from finding more punishable tax mistakes. You know tax mistakes can be costly as a result of penalties. With a tax attorney or expert to help you during the audit process, you never know, some tax mistakes will not be found.

Final Words

Tax problems can land you into more debt. For that reason, you need to think of tax relief solutions that can help you clear your debt easily through installment payment plan. Also, some tax relief options can help you pay less tax bill than owed. Depending on your tax and financial situation, consider the option that suits your right.