It is very scary to get caught in massive tax debt. Owing IRS taxes can breed a series of problems regardless of the amount you are earning; either little or much. When you fail to settle your tax debts early is the worst as it can inflate to an unaffordable amount. You do not need to be afraid of anything if you are being overburdened by taxes. This is because you have a lot of tax debt relief options you can use to resolve your back tax problems.
Offer in Compliance
You will be able to settle tax debts with this program for an amount that is less than what you owe. However, you must show that you are truly incapable of paying the full tax in order to qualify for this program if doing so can result in a financial crisis. Some of the factors considered are your income, expenses, ability to pay and asset equity. Make sure you first check your eligibility before you apply for this program. In the event you have an ongoing bankruptcy proceeding, then you may not be eligible for Offer in Compromise program. Those who opt to hire professional help to help them file the offer should first check their qualifications. If your application is accepted, then be sure to meet all the terms provided in Section 7 of Form 656. This includes making all payments and filing required tax returns. For a rejected application, you can make an appeal within 30 days. Form 13711 allows you to request an appeal for Offer in Compromise.
Look for Tax Deductions
Dollar amount that the IRS allows you to subtract from your adjusted gross income or AGI in order to make your taxable income lower is known as tax deduction. The lower your tax bill would be when your taxable income is lower.
IRS Tax Forgiveness Program
It is easy to qualify for Offer in Compromise or installments programs with this forgiveness program. Programs such as Fresh Start and Student Loan Programs that seek to help taxpayers settle tax debts for a small amount if the total liability are set up by the IRS. The programs allow you to pay a percentage of the total debt depending on your financial status. They will evaluate factors such as your future one-year income potential down from 4 years. They’ve also come up with Allowable Living Expense calculation formula that factors in your bank charges, credit card payments among other allowances.
Penalty and Interest Abatement
Although it is not very common, this program is offered by the Internal Revenue Service to help individuals who’ve shown they are in serious financial troubles and can’t pay their taxes. Tax penalties are abated and you are given relief for failing to file your tax returns on time or to deposit taxes.
Filing for Bankruptcy
You are allowed to relieve yourself from income tax debts with the Chapter 7 of the Bankruptcy Code. However, this should be an option only if you qualify for the requirements to be discharged from tax debts. You can be provided u to full discharge of all your allowable debts with Chapter 7. Tax relief is also given by Chapter 13 but you may need to repay some as it discharges some debts.
Not Currently Collectible
In this program, IRS voluntarily agree not to collect taxes for about a year or more. This means that you have no ability to paying your tax debts. What will be done is to confirm your financial condition. This is useful and you can file for an appeal to stop a lien, levy, denial, seizure or even termination of the installment agreement. You will be able t explain how the situation can be resolved without forceful seizures or levies with this appeal.
This program classifies various types of income as either taxable or tax-free. It reduces the amount you report as your gross income. When your income is excluded from being taxed, then it will not show up on your tax return and in case it shows up then it will come in another return section. Some incomes may be excluded not just because they are hard to measure but to encourage you to participate in various activities.
This is not like tax deduction that reduces the amount of your income subjected to tax, tax credit gives you more savings by simply reducing your tax bill from dollar to dollar. The amount you owe after making all the deductions from your taxable income is where it is applied.