Have you finished preparing your tax returns and found that you still owe some taxes that you didn’t know about? No need to panic.
It isn’t uncommon to find that you have some outstanding taxes when you prepare your tax returns. Luckily, the IRS offers several tax relief options to assist taxpayers to meet their obligations in a way that doesn’t cripple their financial health. Instead of ignoring your tax bill, take advantage of these legal tax relief programs to gain some reprieve and pay with a plan that suits your financial ability.
Installment Agreements are the most common tax relief method for taxpayers who cannot clear their debt in full. It is available to taxpayers whose total tax liability (tax, interest and penalty) does not exceed $50,000.
The IRS can allow you to repay the outstanding taxes in small installments for a maximum of 72 months. Note, however, that any interests and penalties will continue to accumulate on the outstanding debt, therefore you should try to shorten the repayment period
Innocent Spouse Relief
Through Innocent Spouse Relief, the IRS allows innocent spouses to avoid tax, interest and penalties that arise from a current or former spouse’s tax delinquency (underreporting, fraud, or nonpayment).
Innocent Spouse Relief can only be requested when filing individual or self-employment tax returns. However, there are tax liabilities that are ineligible for cancellation under this program, such as business taxes, trust fund recovery penalties, Individual Shared Responsibility payments, and Household Employment taxes.
Offer in Compromise (OIC)
The Offer in Compromise is a tax relief option where a taxpayer pays less than the amount that they owe. Usually, the IRS will accept an Offer In Compromise when they assess the applicant’s tax liability and their present and future (potential) income earning capacity.
To qualify for OIC, you should make the application to the IRS explaining their circumstances and give them your best offer to settle the debt. The IRS only accepts about 25 of all applications, which is why it is critical to use a qualified tax relief professional when making your application.
If you succeed, you should pay your offer amount in five instalments or less. You may be able to appeal the decision if your OIC application is rejected.
Advance Child Tax Credit (ACTC)
This is a tax relief program that the IRS offers to families. Many families will receive Advance Child Tax Credit payments up to 50 percent of the estimated ACTC amount (according to their 2019/2020 tax returns).
Once the IRS processes your 2020 returns, you will receive 50 percent of this credit and from July to December 2021. The remaining half will be paid once your file your 2021 returns. You can learn more about this tax relief program by clicking here.
ACTC payments from the IRS will be paid by direct deposits to make the money easily accessible to the beneficiaries. You should ensure that you provide your correct banking information. Otherwise, the IRS will send checks in the mail beginning July 15 and every 15th of the month after that.
The Coronavirus Economic Impact Payments
The IRS is also sending out the third round of Economic Impact Payment to the eligible individuals. Some people have already received their payments, but if you haven’t, it doesn’t mean you won’t get it.
Additionally, the IRS is offering a 2020 Recovery Rebate Credit for those who didn’t get their first or second Economic Impact Payment or those who got less than the full amount. Those who are eligible to receive the payment but don’t usually fill tax returns can use the Non-Filer Sign-Up tool to register.
Get Help for All Your Tax Concerns
Do you need help filing your 2020 tax returns? Contact our professionals at Finishline Tax Solutions for tailored solutions according to your needs.