Your debt may increase rapidly due to penalties and fines when you owe delinquent taxes. The IRS can also take measures like imposing tax liens on your property, requesting a financial audit, or freezing your assets to recover the amount due.
Applying to a tax forgiveness program allows you to repay your debt over a specified duration. Here, we discuss some options you can use to repay your debt if you owe $10,000 or more and their eligibility criteria.
A Short Term Installment Agreement
One option you can use to clear a $10k+ IRS debt is a short-term installment plan. This agreement allows you to pay the debt within 180 days or less. For you to qualify for a short-term installment plan, your debt must be less than $100,000, including penalties, interests, and fines.
A Long-Term Installment Agreement
A long-term installment agreement is suitable if your total debt is less than $50,000. When you qualify for this IRS Fresh start program, you must repay what you owe within 72 months. In most cases, the installments you remit each month will depend on your debt amount and financial capability.
Offer in Compromise
An offer in compromise (OIC) is an IRS tax debt relief program that allows you to repay a lower amount. To qualify for this plan, you must file past returns and deposit the estimated tax requirement for the current year. If you are a business owner, the IRS will also require you to make all federal tax deposits.
Once you qualify for an offer in compromise, the IRS will determine the amount you can pay based on your financial situation. They will then require you to make specific monthly deposits to clear your debt.
Another IRS tax resolution option under the offer in compromise program is lump sum cash. This plan involves making a 20% deposit of the offer amount when sending your OIC application. If the IRS accepts your request, you will clear the remaining balance in five or fewer installments.
Currently Not Collectible (CNC)
Financial hardships can make it tough to clear your tax debt. Luckily, the IRS provides a currently not collectible plan to stop collection measures until your situation changes.
Before you qualify for this plan, you must prove that paying the debt will cause significant financial hardships. The IRS will then conduct period reviews to assess your situation and require you to start installment payment if your status improves.
Penalty abatement is an IRS tax debt relief program involving a penalty reduction or removal. When applying for this plan, you must provide a reasonable cause for failing to meet your tax obligations. Some aspects that will qualify you for a penalty abatement are:
- A natural disaster that destroyed vital personal documents
- Severe illness or death of your immediate family
- Inability to get records needed for tax preparation
How to Apply to the IRS Fresh Start Program
The forms needed when applying to a Fresh Start program will depend on the selected repayment plan. Consult a tax resolution expert to determine the most suitable option depending on your debt and ability to pay. After that, gather the needed documents and submit them alongside your IRS tax debt relief application.
You may need to deposit a certain fee when sending a Fresh Start application. A tax resolution expert will help you determine the charges for each program. They can also recommend applying online or via mail based on your preferences.
Determine If You Qualify for a Tax Forgiveness Program
Navigating IRS tax resolution can be challenging without help. At Finishline Tax Solutions, we have a team of CPAs and attorneys who can help you determine eligibility for the Fresh start program. They will then file your taxes and ensure you apply for an appropriate repayment plan. Call us today to schedule a consultation.