Tax Relief and Resolution: 5 Ways to Deal with Tax Debt
If you find yourself in a tax predicament, whether it’s falling behind on your taxes or grappling to pay off a tax liability, you might be wondering what solutions are available to you. Here are five resolutions that may be available for individuals who are seeking assistance with federal and state tax obligations, past due taxes, tax penalties, and more.
- IRS payment plan
- Offer in compromise
- Currently-not-collectible status
- Penalty abatement
- Tax-relief providers
What is tax debt relief?
Tax debt relief refers to various programs, strategies, and options available to individuals and businesses who are struggling to pay their outstanding tax liabilities. It is designed to help taxpayers reduce or manage the amount of money they owe to the government, often the IRS in the United States. Tax debt can accumulate due to unpaid income taxes, penalties, interest, or other tax-related obligations.
5 common tax relief options
1. IRS and State Revenue Installment Agreements
A payment plan can be negotiated with tax authorities to make regular, manageable payments until the debt is fully paid.
- IRS Installment Agreement: This is a payment plan offered by the Internal Revenue Service (IRS) to taxpayers who can’t pay their entire federal tax debt at once. It allows you to make monthly payments over time until the debt is paid off. The terms and conditions can vary depending on the amount owed and your financial situation.
- State Revenue Installment Agreement: Many state revenue agencies offer similar installment agreements to help taxpayers pay their state tax debts over time. These agreements are separate from the federal IRS installment agreement and are specific to state tax obligations. Terms and eligibility criteria may differ from state to state.
2. Offer in Compromise
This program allows eligible taxpayers to settle their tax debt for less than the total amount owed if they can demonstrate financial hardship or doubt of collectability. If accepted, you pay a reduced amount, and the IRS forgives the remaining debt. It’s a way for financially distressed individuals to resolve their tax liability and get a fresh start.
3. “Currently-not-collectible” status
This is a temporary status granted by the Internal Revenue Service or State Revenue Services when a taxpayer is facing severe financial hardship and cannot afford to make payments toward their tax debt. While in CNC status, the IRS temporarily stops its collection efforts. This means they won’t pursue actions like wage garnishment or bank levies. However, the tax debt doesn’t disappear, and it can still accrue interest and penalties. The IRS periodically reviews the taxpayer’s financial situation, and when it improves, they may resume collection efforts. It’s a way for individuals to get a reprieve from collection actions while they are in a difficult financial situation.
4. Penalty abatement
Penalty abatement is a request made to the Internal Revenue Service and State Revenue services to have certain penalties associated with your tax debt forgiven or removed. The IRS imposes penalties for various reasons, such as late payment, late filing, or underpayment of taxes. To qualify for penalty abatement, you generally need to demonstrate “reasonable cause” for your failure to meet tax obligations on time. This can include circumstances like serious illness, natural disasters, or other factors beyond your control. If the IRS grants penalty abatement, it means they’ll waive or reduce the penalties, but you’re still responsible for the underlying tax debt and any interest that has accrued. Penalty abatement is a way for taxpayers to alleviate some of the financial burden associated with tax penalties when they can show a valid reason for their noncompliance.
5. Hiring a tax-relief company
Tax relief companies, also known as tax resolution firms, provide services to individuals and businesses dealing with tax problems or financial difficulties related to their tax obligations. Here’s what tax relief companies typically do:
- Tax Consultation: Tax relief companies begin by offering a consultation to assess your tax situation. They gather information about your tax debt, income, expenses, and financial hardships.
- Negotiation with Tax Authorities: These firms often have experienced tax professionals who can negotiate with tax authorities, such as the IRS, on your behalf. They can help you set up payment plans, negotiate settlements, or request penalty abatements.
- Offer in Compromise (OIC) Preparation: If you qualify for an Offer in Compromise (OIC), tax relief companies can help prepare the required documents and negotiate with tax authorities to reduce your tax debt.
- Installment Agreements: They assist in setting up installment agreements with the IRS or state tax agencies, allowing you to pay off your tax debt over time in manageable installments.
- Innocent Spouse Relief: If you’re seeking innocent spouse relief, they can guide you through the process and help present your case to the tax authorities.
- Penalty Abatement: Tax relief companies can assist you in requesting penalty abatements by demonstrating reasonable cause for late payment or noncompliance.
- Currently Not Collectible Status: They can help you apply for Currently Not Collectible (CNC) status if you’re facing financial hardship, temporarily suspending collections.
- Representation in Audits: In some cases, they may represent you during IRS audits, helping ensure your rights are protected and the audit process is fair.
- Tax Settlement and Resolution: Tax relief companies work toward resolving your tax issues, whether through debt reduction, favorable payment terms, or other arrangements that make it easier for you to fulfill your tax obligations.
- Tax Compliance and Planning: Some tax relief firms also provide services to help you get back on track with your tax compliance and develop strategies to prevent future tax problems.
It’s important to choose a reputable tax relief company, as the industry has had its share of fraudulent or unscrupulous operators. Ensure that the firm you choose is properly licensed, has experienced professionals, and has a good track record of helping clients with their tax problems.
CuraDebt is at your service
At CuraDebt Tax, we have a team of tax professionals who are available to assist you with all of your tax needs. If you currently owe the IRS money, our team of tax professionals can find the best IRS resolution available to you. Contact us today to better understand your tax problems. CuraDebt has been helping individuals and small businesses for over 22 years nationwide. As of May 2023 CuraDebt received a score of 5 out of 5 on CustomerLobby for a total of 1179 customer views. CuraDebt is an Accredited Member of the American Fair Credit Council. Contact us for a free consultation. 1-877-999-0486. Take advantage of exploring another option for free. Not only do we handle tax relief, we also offer debt relief.
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