Owe the IRS $10K+?: See if you qualify for IRS Tax Forgiveness Program

Owe the IRS $10K+?: See if you qualify for IRS Tax Forgiveness Program

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

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.

IRS Hardship and Future Tax Compliance

Ensuring Compliance During Financial Hardship

When you are under the IRS Hardship Program, maintaining compliance with tax laws becomes even more critical. Here is a detailed exploration of what compliance entails and the consequences of non-compliance:

  1. Timely Filing of Tax Returns: One of the key requirements while under the Hardship Program is the timely filing of all tax returns. This includes filing returns by the due date each year, even if you cannot pay the taxes owed. Timely filing demonstrates to the IRS your commitment to staying compliant and responsible, despite your financial difficulties.
  2. Paying Current Year Taxes: Equally important is the need to pay any taxes due for the current year. The Hardship Program does not exempt you from paying your current tax liabilities. If you accrue new tax debts while under this program, it could be seen as an inability to maintain tax compliance, risking your status in the program.
  3. Understanding Compliance Implications: The rationale behind these requirements is that the IRS Hardship Program is designed to help you manage past tax debts, not to facilitate the accrual of new debts. Maintaining compliance shows the IRS that you are making a good faith effort to fulfill your tax responsibilities, despite past difficulties.
  4. Setting Up Payment Plans for Current Taxes: If you find yourself unable to pay your current year’s tax liability in full, it is important to proactively engage with the IRS. Consider setting up a payment plan or exploring other payment options for the current year’s taxes. This demonstrates your commitment to staying compliant and managing your tax responsibilities.
  5. Impact of Non-Compliance: Failure to comply with these obligations, such as not filing returns or not paying current taxes, can lead to the IRS revoking your non-collectable status. If this happens, the IRS can resume active collection actions, which could include garnishing wages, levying bank accounts, or seizing assets.
  6. Regular Reviews and Compliance Checks: The IRS periodically reviews your financial situation and compliance status while you are in the Hardship Program. These reviews assess whether your financial condition has improved and whether you have remained compliant with tax laws. Staying compliant increases the likelihood of maintaining your non-collectable status during these reviews.
  7. The Role of Tax Professionals: Navigating tax compliance while under financial hardship can be challenging. Seeking advice from tax professionals can be invaluable. They can assist in understanding your obligations, help in filing tax returns, and advise on managing current tax liabilities.
  8. Record Keeping and Documentation: It is advisable to keep thorough records of all your tax filings and payments while under the Hardship Program. This documentation can be crucial during IRS reviews and can serve as evidence of your compliance and commitment to fulfilling your tax obligations.