Tax debt relief is simply a way the government considers to help you once you can’t afford to pay your bills or tax bill. This comes within the sort of a payment plan or a settlement during which the IRS agrees to settle your tax debt for fewer than the complete amount you owe.
If you can’t afford to pay your taxes on time, you’ll qualify for a few sort of tax debt relief. Usually, this relief comes within the sort of a payment plan or debt settlement with the IRS.
If you think that you would like tax debt relief, act quickly to resolve your issues.
The IRS charges a failure-to-pay penalty of 0.5% of your unpaid taxes per month or a part of a month, plus interest. Interest starts accruing on the day your taxes are due (Tax Day, which is usually April 15), and continues until you pay your bill fully.
So if you owe $1,000 and you pay the balance six months late, you’ll be hit with a failure-to-pay penalty of $30, plus the quantity of interest that’s accrued. That doesn’t sound sort of a lot, but if you delay payment long enough, the penalty is often the maximum amount as 25% of your unpaid taxes.
What’s more, the IRS can put a lien on your property (a legal claim) if you don’t pay what you owe. A lien may result in the IRS seizing the proceeds once you sell the property. Or it’s going to place a tax levy on the property, during which case it can take the property and sell it to recoup the taxes you owe the government. Affected property can include not only your home, if you own it, but also private property and financial assets.
TYPES OF TAX DEBT RELIEF OPTIONS
when evaluating which tax debt Relief Company to use, consider how you would like to affect the IRS. Additionally to OIC and payment plan options, most companies provide various other avenues for tax debt forgiveness. Those options include:
Innocent Spouse Relief
Most couples who marry within us file a joint income tax return with the IRS. While that filing status generally comes with some benefits to the couple, it also can cause some liability for either individual. Certain cases, like when a spouse fails to properly report income or claims incorrect deductions or credits, can cause financial harm to other people or individuals. Innocent spouse relief helps protect partners from their spouse’s mistakes.
Separation of Liability Relief
Most tax debt relief companies can help divorcees affect the financial sins of the opposite. During this instance, the IRS allows for “the separate allocation of additional tax owed” between the 2 individuals. Both parties must either be legally separated from or not living with one another to qualify for this sort of relief. Further, you’re accountable for the quantity of tax allocated to you.
When neither Innocent Spouse Relief nor Separation of Liability Relief is applicable for love or money not properly reported to the IRS on a tax return, you’ll attempt to seek Equitable Relief. To be considered for this feature, the problem must be due to your spouse. in line with the IRS, you’ll also qualify for this feature “if the quantity of tax reported is correct on your tax return, but the tax wasn’t paid with the return.”
Currently Not Collectible (CNC)
If you’re financially unable to repay your tax debt, you’ll qualify for Currently Not Collectible status. Instead of absolution of your liability in terms of tax, CNC is more of a reprieve from the IRS collection efforts. Under this agreement, you’ll stop receiving letters and therefore the phone calls will stop while you get things back in check.
To qualify, you want to prove your financial hardship to the IRS. You’ll do this by sharing your financial information with the authorized government agencies, including any savings accounts or other potential assets. with no assets to repay the debt, the IRS will have to document your average monthly income and living expenses so as to see if an installment agreement would be better. You’ll even be required to file a budget and potentially prove your income and expenses.
Federal Tax Lien/Levy Assistance
If you’ve did not pay your taxes and ignored the matter for a few times, the likelihood is that you’ve got been threatened with or been the topic of tax liens or levies. Levies and liens are the federal government’s way of ensuring it gets the cash owed to them. If you’re hit with a tax levy, the IRS can garnish your wages, withdraw funds from your bank accounts, garnish your Social Security and seize your property, though the last option is typically for the foremost egregious tax dodgers.
Tax liens, however, originate from overdue property taxes or failing to pay your taxes. Liens generally affect land and private property, quite your checking or bank account. If you’ve got a lien, your credit score will take successful and your ability to urge a loan or refinance your home are going to be severely hampered, among other issues. Tax debt relief companies negotiate with the IRS to lift levies or liens while you get everything so as.
If you cannot pay the penalties leveled against you from the IRS, some tax debt relief outfits will work to possess those fees reduced or removed. Penalties are often incurred if you fail to file your taxes, don’t pay your taxes during a timely manner, or don’t deposit your taxes before the deadline.
Audit Representation and Tax Preparation
If you or your business are being audited, most tax debt relief companies will provide representation. Additionally, some tax debt relief companies offer a tax preparation service aimed toward ensuring you are doing not infract with the IRS again.