IRS Tax Debt Forgiveness
Millions of Americans each year find themselves in debt to the IRS and owing back taxes on their income. With such a huge portion of the country’s population owning the government agency money, the IRS cannot realistically collect all of those back taxes. That facilitated the need for IRS tax debt forgiveness programs. If you cannot pay your taxes in full and aren’t sure how to begin paying back what you owe, Community Tax can help you determine which IRS debt forgiveness program is best for your situation.
How to Pay Off IRS DebtAlways file your tax return. Regardless of whether you’re able to pay your tax debt, filing your return by the deadline will help you avoid penalties and interest. The failure to file penalty is steep – usually the cost is 10 times more than the failure-to-pay penalty. The penalty for failing to file is generally five percent of the unpaid taxes for each month or portion of a month that your tax return is late; it builds on itself, but will never exceed 25 percent of your total unpaid tax debt. Compare that to the penalty for paying late: a mere .5 percent for each month your taxes go unpaid. The minimum late filing penalty is $ 135 or 100 percent of your unpaid tax, whichever is less.
Stressed about how much you owe in back taxes? We can help you determine which debt forgiveness program is right for you.
IRS Debt Forgiveness ProgramsThanks to various programs, particularly the Fresh Start Initiative , there are numerous types of IRS Debt Forgiveness.
Currently Not Collectible Status
Have Installment Agreements Ever Been Revoked?After your payment plan request is approved, it’s important to remain diligent with your payments. IRS Debt Forgiveness programs are not unbreakable; the IRS has no problem with revoking installment agreements. There are terms that both parties (taxpayer and IRS) are bound to follow, but should you break these terms, the government can revoke the payment plan.
- Default on Payments: If you miss any of your payments, the IRS could choose to revoke your agreement immediately. In most cases, they’ll send you a notice or warning letter that provides you with 30 to 60 days to get up to date on your payments. After being revoked due to missed payments, you may have the opportunity to reinstate your plan by paying the outstanding balance.
- Failing to File or Pay Future Tax Returns: The installment agreement is conditional based on your current and future returns and income taxes. Should you fail to file or fail to pay an upcoming return, the Internal Revenue Service will automatically revoke your installment agreement.
- False Information: If you’ve knowingly given the government inaccurate or incomplete information during the negotiation process, and they discover your deception, your agreement will be revoked and you could face harsh consequences.
Offer In CompromiseIf you cannot realistically pay off your tax debt, the IRS may consider accepting an offer in compromise (OIC). An offer in compromise allows a taxpayer to settle their debt for less than what they owe, with the settlement amount determined on the basis of what they can actually afford to pay. There are three reasons the government will generally accept an OIC request:
- Doubt as to Collectability
- Doubt as to Liability
- Effective Tax Administration