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There are numerous tax programs in existence that can help you get out from under the stressful burden of IRS debt. Owing back taxes comes in many different forms, and each type of tax related issue has a different solution. It's important to know just what kind of options are out there and which ones work best for you.

In recent years, the IRS began focusing on the IRS Fresh Start Initiative. This initiative helped expand relief for taxpayers by modifying standards to make it somewhat easier for those owing tax debt to get their heads above water. In many cases this has involved lowering restrictions or modifying dates in order to help make it easier to qualify for different programs. As a result, those who find themselves in debt to the IRS could have even more options than they once did.

The first step is simply realizing that you do have options, and that you don't have to just take whatever the IRS throws at you. Understanding more about the tax relief programs that can help is the key to unlocking a solution for your tax problems. Here are some of the most commonly used – and most effective – tax relief programs available.

Installment Agreement

An IRS Installment Agreement is just what it sounds like. Instead of paying off one lump sum amount, you'll be paying a monthly payment much like a credit card. Agreeing to this will allow you to avoid bank account levies or wage garnishment as long as you make your payments on time. IRS form 9465 is used to request an Installment Agreement, but there is no guarantee that you will be accepted for the program. Form 433A or 433F will need to be filed as well to report your financial information and determine whether or not you are eligible. The overall amount owed, your income level, and other factors will determine whether or not you're accepted. If so, payment plans will be set up with various terms or conditions in place. Different steps are taken based on the total amount of back taxes owed. Those owing less than $10,000 are often guaranteed to be allowed to set up a payment plan. Beyond those amounts, numerous steps will have to be taken.

help with installment agreements

Offer In Compromise

This is an option that can sound too good to be true. Offer in Compromise is essentially a process that allows a debtor and the IRS to come to an agreement over the amount paid. Instead of the full amount, you'll end up paying a smaller amount that allows you to settle your debts. It's an excellent opportunity, but difficult to qualify for, and is intended for those who have gone through major financial issues in the past few years that make it difficult to meet the total amount of taxes owed. IRC Section 7122 lays out the basic guidelines for applying for an Offer in Compromise, and only about 1% of the offers submitted each year are actually accepted by the IRS. In other words, it's not as simple as just offering to pay less and having the IRS agree. Usually, the offer will be paid in monthly installments until the total amount is paid for.

more information about the offer in compromise

Statute of Limitations

One of the simplest, most effective, and most overlooked options that can be used to help avoid IRS tax issues is the expiration of the Statute of Limitations. According to section 6501 there are very strict guidelines in place that the IRS must abide by. Essentially, the IRS only has 3 years in which they are allowed to audit a tax return and only 10 years within which they can collect back taxes. In other words, if those time limits expire, you aren't legally obligated to pay the back taxes. There are certain things that could extend these limits, however, and actually requesting things like an Offer in Compromise could add time to the statute of limitations. Other exemptions may apply as well, and as a result it is important to carefully consider each option available to you during the process of handling an IRS related issue.

statute of limitations explained

Currently Not Collectable

This status simply means that you are found to be completely unable to pay off your current tax debt. If you achieve this status the IRS will be required by law to stop all collection activity against you. This includes levies, wage garnishment, and more. However, the status of Currently Not Collectable is only a temporary solution to the problem. Normally, you'll hold your CNC status for 12 to 24 months. During that time, you won't be required to make monthly payments and won't face any collection actions. But, interest and penalties will continue to be charged against you. In some cases, this status is a way to postpone collections until the statute of limitations has expired, turning a temporary solution into a permanent one. Forms 433A or 433F will need to be filled out to begin the process.

more about IRS hardship status

Innocent Spouse Relief

IRS Form 8857 allows you to request Innocent Spouse Relief status. This form covers the request entirely, with no additional forms needed. Approval of the request frees you from being held liable for the tax debt incurred by a former spouse or even a current spouse. You must meet specific guidelines such as not having shared bank accounts or proof that you didn't benefit from the money obtained through tax manipulation. There are a few different types of relief that falls under this category, and finding the specific one for you is important.

help with innocent spouse relief

Penalty Abatement

This type of relief is designed to help those who can afford to pay the total amount of taxes they owe, but not the interest or penalties that their back taxes have accrued. Form 843 must be completed to request penalty abatement, and if approved it is possible to remove the fees and penalties attached to tax debt. You'll need to show reasonable cause as to why you didn't pay taxes properly. This essentially means that you must show a valid reason that you couldn't file your tax return or pay them on time. Issues like loss of wages or disability could qualify as reasonable cause.

reduce the amount you owe with penalty abatement

IRS Bankruptcy

Tax bankruptcy certainly isn't a 'best case' option, but in some instances filing bankruptcy could help alleviate tax debt. Certain requirements must be met including that all taxes must be due for at least 3 years and all returns must have been filed for at least two years. Additionally, tax liabilities must have been assessed for a total of at least 240 days. If these conditions are met, it's possible to use Chapter 13 or Chapter 7 to alleviate tax debt.

bankruptcy protection help for distressed taxpayers

These points only touch on the basics behind the different tax relief programs available, and the specifics are very complex. Navigating the waters of tax debt is something that is almost impossible on your own. An experienced tax attorney can help you determine exactly what kind of relief program works the best for your situation and how to get the maximum amount of relief from your current tax burden.

With over 20 years' experience in tax law, Attorney Mary E. King is one of the leading tax attorneys in Florida and has helped countless Floridians escape the burden of tax debt. Contact Mary for a consultation to get started on your own tax relief programs.




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