An Installment Agreement allows you to pay back your taxes in affordable monthly payments. Additionally, the IRS has different tiers for Installment Agreements. For instance, the IRS will approve your request if you owe less than $10,000. The IRS is likely to approve your request if you’ve filed your income tax returns in the last five years. You also have to fill out a form in most circumstances. However, if you owe $50,000 or less, you can avoid filling out a form and apply online. Typically, most Installment Agreements will meet the IRS criteria. Likewise, with an Installment Agreement, you pay small monthly payments until your debt is paid in full.
How Long Do I Have to Repay an Installment Agreement
The maximum repayment term for the IRS Installment Agreement is six years. However, if you can pay back your tax debt in four months, you’re not a good candidate. Instead, the IRS will recommend that you go online to pay your tax debt balance.
Who is Eligible for an Offer in Compromise?
It’s important to note that there are certain criteria to be eligible for an Offer in Compromise. Most importantly, the IRS determines if you’re eligible by:
- Checking your income
- Reviewing your expenses
- Checking your asset equity and your ability to pay
Alternatively, if the IRS feels you are eligible to pay the full amount, your OIC will be rejected. However, if your OIC application is rejected, you can still apply for an Installment Agreement. In other words, you do not have to worry about paying your tax debt back in one fell swoop. Even if you can afford to pay all at once, there are payment options available to you.
What is the IRS Fresh Start Program?
Another form of tax relief is the IRS Fresh Start program. This program allows you to settle tax debt in a variety of ways. Likewise, the goal of this program is to give taxpayers a more affordable way to settle tax debt. Similarly, the Fresh Start program provided by the IRS gives taxpayers with substantial tax debt six years to affordable pay it off. For instance, each month taxpayers make payments to the IRS. These payments are based on their current income and the value of their liquid assets. At the end of the six years, the taxpayer’s tax debt should be paid in full. In conclusion, the Fresh Start program simplifies the process of paying back large tax debts. Furthermore, the Fresh Start program helps people avoid the downside of owing back taxes, including:
- Tax liens
- Seizure of assets
- Wage garnishments
Who Qualifies for the Fresh Start Tax Relief Program?
People who owe $50,000 or less in tax debt can qualify for this tax relief program. Additionally, taxpayers can choose from one of three payment options when they apply to this program.
- First, a taxpayer can apply for the IRS Installment Agreement. This program gives the taxpayer six years to pay off what they owe. Additionally, the taxpayer does not incur any interest or penalties while they’re paying off their tax debt with IRS debt help.
- Second, a taxpayer can apply for an Offer in Compromise through the Fresh Start program. As mentioned, an OIC is rare but taxpayers can pay off what they owe the IRS.
- Third, a taxpayer can apply for a tax lien withdrawal. In other words, a taxpayer approves for their account to be automatically debited for the payment each month. A tax lien withdrawal also lowers the threshold under which the government can place a tax lien on your account. At FinishLine Tax Solutions, we can also help you get that tax lien released.
How Can I Apply for the Fresh Start Program?
Before you apply for the Fresh Start tax debt relief program, you must file all outstanding tax returns. The IRS will not allow you to apply for this program until you have filed all taxes. For instance, you may not have filed taxes this year, and owe the IRS. However, the IRS will not know how much you owe, and can’t confirm your tax payment amount.
Who Needs Debt Relief Program?
Several groups of taxpayers may require tax debt relief. However, before you apply for this program, check with your tax professional. The IRS offers many types of IRS programs. Therefore, it’s best to understand your tax situation first before you apply. However, here are some of the individuals who may require tax debt relief.
- Taxpayers who have fallen behind on their taxes. Additionally, taxpayers who lack the resources to pay their tax debt
- A taxpayer who has been contacted by private debt collectors hired by the IRS.
- Those who have not filed tax returns for several years.
- Taxpayers whose debt has caused the IRS to revoke or confiscate their passports. Typically, only individuals who owe $50,000 or more are in danger of losing their passports.
Can I Get Tax Relief from Interest and Penalties?
The IRS does offer several programs to reduce penalties charged on tax debts. For instance, through a penalty abatement program, the IRS may reduce some of the penalties charged on your taxes. As a result, your tax debt will be lower. However, it’s very rare for the IRS to forgive interest charged on taxes. Therefore, the longer you go without paying taxes the more interest you will accumulate.
What if My Spouse Needs Tax Debt Relief?
In some cases, it’s the spouse that needs tax debt relief. The IRS sympathizes with spouses or former spouses who find themselves in tax trouble. For instance, you may have filed jointly with your spouse and are therefore partly responsible for their wrongdoings. In some cases, this program can relieve a partner of any taxes, interest, or penalties. In other words, an option called Innocent Spouse Relief is sometimes an option for married or divorced couples.
What are the Criteria for Innocent Spouse Relief?
There are several requirements taxpayers must meet to qualify for Innocent Spouse Relief. To be eligible, the spouse must:
- Filed a joint tax return containing the errors.
- Must have lacked knowledge of the error.
- Once identified, the IRS must agree to relieve the innocent spouse of the tax in question.
- A spouse must apply for tax debt relief within two years of the IRS initiating the collection.
What Will the IRS Do If I Don’t Pay Taxes?
When you’re seeking relief from tax debt, it’s important to look out for collection actions. If you can’t pay taxes but haven’t applied for a relief program yet, the IRS will come after you. For instance, the IRS can mail you letters requesting payment for the debt you owe. Additionally, some of the IRS’ popular collection actions include:
- Tax lien: the government’s claim against your property
- Tax levy: the government’s legal seizure of your property to satisfy the outstanding unpaid tax debt.
- Wage garnishment: the IRS takes a portion of your income to settle your existing tax debt.
- Before the IRS starts knocking on your door, it’s best to come up with a tax relief plan.
Get Help with Tax Debt Relief
The first step to tax debt relief is understanding what you owe. Likewise, dealing with the IRS isn’t easy to do alone. Fortunately, there are professionals, like FinishLine Tax Solutions, who can help you figure out your options. In some cases, professional help may be necessary to get the best outcome for your tax situation. FinishLine Tax Solutions’ team of trained tax professionals has been helping people with IRS issues for years. Call us today and find out how we can get you back on the road to financial freedom.