Dealing with tax debt can be complicated since the IRS has different policies for each situation. As a result, you may need more information regarding dealing with tax debt and avoiding collection measures. Here, we help you understand various tax debt topics by answering some frequently asked questions (FAQs).
IRS Debt Forgiveness
Paying tax debt in a single transaction can be challenging and affect your financial situation. If you are looking for an effective way to avoid penalties accumulation and financial strain, consider IRS debt forgiveness. Some common questions on the topic are:
Does the IRS Really Forgive Tax Debt?
The IRS can forgive tax debt under certain circumstances. For example, if you cannot pay the penalties and amount you owe due to severe financial challenges, the IRS may waive the debt.
However, they will only write the debt off if it exceeds ten years from when they conducted an assessment.
How Do I Get My Tax Debt Forgiven?
The IRS rarely forgives the total debt amount unless they enact the 10-year rule. Applying for a tax forgiveness program is the best way to get the IRS to write off some debt.
A plan such as an Offer in Compromise will allow you to repay an amount lower than the total debt. It also stops the IRS from seizing your assets or freezing your accounts
Does IRS Forgive Tax Debt After 10 Years?
Yes. The IRS can forgive tax debt that exceeds ten years if you cannot pay. This duration may extend since they will count from the last date of your tax assessment. Besides, some agreements, such as an installment payment, may include signing a waiver that allows the IRS to extend the duration.
Who Qualifies for One-Time Forgiveness?
Taxpayers who do not have recent debt or tax filing mistakes can qualify for the one-time forgiveness program. The IRS will check if you correctly filed your returns when you apply for this plan. They will also confirm if they charged penalties and fines for the previous filing period.
If you meet such requirements, the IRS will use other eligibility criteria to determine if you qualify for one-time forgiveness. Some aspects that may make you eligible are:
- Failing to meet your tax responsibility due to factors beyond your control
- Making tax mistakes due to advice offered by IRS officials
- Filing and paying returns correctly for the last three years
How Likely Is the IRS to Accept an Offer in Compromise?
The IRS rarely accepts Offer in Compromise applications. You will only qualify for this program if there is a dispute regarding the tax debt based on the law. You may also be eligible if there is no doubt of liability, but the IRS is not sure they may recover the total amount you owe.
The last aspect that may qualify you for an OIC is if requiring you to repay the entire debt will lead to further economic hardship.
What Is the IRS Hardship Program?
The IRS hardship program is a plan to help taxpayers facing extreme financial problems. You will be eligible if you cannot meet basic living expenses after paying your tax debt.
If you qualify for this plan, the IRS will require you to remit a given amount each month and stop collection measures
Does the IRS Have an Amnesty Program?
Yes. The IRS has amnesty programs to forgive non-willful taxpayers. If you qualify for such a plan, the IRS may reduce or remove all penalties imposed on your tax debt. Still, you must repay all delinquent taxes related to the domestic or foreign income you did not report.
What is IRS Fresh Start Program?
The IRS Fresh Start program refers to several options offered by the IRS to enable taxpayers to clear their debts conveniently. These include:
- An Offer in Compromise
- An installment agreement
- Penalty abatement
- Currently not collectible
Each plan under the IRS Fresh start program has its eligibility requirements. Hence, you should always learn more about them and consult an expert to identify the most suitable option.
Dealing With the IRS
If you owe the IRS, you may have to email them and provide various documents. You may also need to meet with the officials to assess your tax documents and determine eligibility for relief programs. Here are some inquiries you may have on dealing with the IRS.
What Should You Do if You Owe the IRS a Lot of Money?
If you owe the IRS a lot of money, you should set up a payment agreement. Such will help you repay the debt slowly based on your financial situation. It also protects your properties and prevents debt accumulation.
Another way to deal with significant IRS debt is by requesting a short deadline extension. This step will be suitable if you can pay but must wait for a transaction to mature.
Can I Negotiate With the IRS on Back Taxes?
Yes. You can negotiate with the IRS for favorable payment terms on your back taxes. However, you should reach out to them before the deadline provided in a notice letter.
Further, prepare all the documents and information you need for the meeting. It is also vital to understand the benefits and requirements of each debt relief program.
Can I Negotiate With the IRS Without a Lawyer?
You may negotiate payment terms with the IRS without a lawyer. However, consulting an attorney can help you settle for the most suitable tax relief option. Besides, it ensures you present all the information the IRS may need for specific programs.
Are Tax Attorneys Worth It?
Yes. Tax attorneys understand all IRS policies and state laws. Besides, they know the criteria the IRS uses to determine if an applicant is eligible for a specific tax relief plan. With their assistance, you may qualify for better repayment deals and save money.
IRS Audit Representation
An IRS audit involves reviewing your tax documents to determine if you provided the correct information. This process is often stressful for many, especially if you are unsure about the issues that triggered it.
Do You Need Representation for IRS Audit?
It is not compulsory to get legal representation during an IRS audit. However, consulting a lawyer or CPA agent can simplify the process and improve outcomes in various ways.
For example, the tax professional will organize the needed document before the audit date. Further, they will handle all communications with the IRS so you can focus on your life or business.
What Happens if I Miss the Mail Audit Response Deadline?
If you do not respond to an audit notice in time, you have 90 days to request the IRS for a reconsideration. Failure to do this will lead to penalties and other tax debt collection measures.
Always respond to the letter mailed by the IRS on time. Further, consult a tax professional to ensure your response contains the needed details.
What Happens if I Ignore an Audit?
Ignoring a tax audit has many adverse effects. For example, the IRS will impose significant penalties and interest on the amount you owe. You may also lose the opportunity to negotiate and appeal payment terms.
What Will Trigger an IRS Audit?
One aspect that may trigger an IRS audit is significant income disparities. The IRS may also request this process if your tax forms have some inconsistencies. More issues that may lead to an IRS audit are:
- Home office deductions
- Filing a Schedule C
- Incomplete tax returns
- Failure to report all your income
What Should You Not Do in an Audit?
Making some mistakes with the IRS can lead to legal actions and penalties. Avoid submitting false documents or lying to the auditor.
Further, do not make unnecessary remarks since they may land you in trouble and cause the IRS representative to expand the audit. Other mistakes to avoid during an audit are submitting original documents and making rude remarks or responses.
IRS Penalties on Tax Debts
The IRS imposes penalties and fines on the amount you owe. Some common questions regarding this topic are:
What Is the IRS Underpayment Penalty?
The IRS charges an underpayment penalty of 0.5% on underpaid taxes. They will impose this charge each month or part of the month you do not clear the debt. Still, the penalty cannot exceed 25% of the delinquent taxes.
How Do I Get the IRS to Remove Penalties and Interest?
Applying for penalty abatement is the best way to get the IRS to remove interests. You might qualify for this debt relief program if you paid all the taxes you owe or set up a payment plan.
The IRS may also approve a penalty abatement application if you requested a deadline extension or did not previously have to file returns.
What if I Owe More Than $10000 in Taxes?
If you owe the IRS more than $10,000 in taxes, they will impose penalties and fines. Avoid such charges by applying for a tax debt relief program. The IRS offers installment plans which allow you to clear the debt in up to 72 months.
What Happens if You Owe the IRS More Than $25000?
If you owe the IRS more than $25,000 but less than $50,000, you may qualify for the installment agreement program. However, if the debt, including interest, is more than $50,000, you may need to apply for special programs allowing you to pay the amount in 84 months or more.
IRS Tax Debt Collection Measures
The IRS uses various measures to recover delinquent taxes and penalties. Here are some FAQs on the matter.
Can the IRS Take Money From My Bank Account Without Notice?
No. The IRS cannot levy your bank account without sending a notice. This rule allows you to dispute the collection measure if you do not owe the amount indicated in the letter. It also gives you more time to negotiate a repayment plan.
Can IRS Take Your Car?
Levy permits allow the IRS to take and sell your car if you do not actively try to clear your debt. They can also seize other assets such as your property and land.
Can You Collect Social Security if You Owe the IRS Money?
You may collect social security benefits if you owe the IRS. However, if you do not have a repayment plan, they may deduct up to 15% from your monthly cheques until you clear the delinquent taxes.
How Far Back Does the IRS Go For Unfiled Taxes?
The IRS often requires taxpayers to file all the returns for the past six years. Still, they can assess tax deficiency beyond this time in exceptional cases.
What Is the IRS 6-Year Rule?
The IRS 6-year rule allows you to pay living expenses beyond the collection financial standards. If you do not qualify for a streamlined agreement, you can still make a minimum payment for your tax debt, provided you pay the entire amount in 6 years.
Contact FinishLine Tax Solutions for More Information
Getting answers to tax debt questions can help you determine the measures to take if you owe the IRS. It also allows you to leverage relief programs offered by the IRS.
At FinishLine Tax Solutions, we can answer all your questions on delinquent taxes. Our legal team will also represent you during audits and negotiations. Contact us today for an inquiry.
- FinishLine Tax Solutions is a full-service, fully accredited tax resolution firm in Houston, TX, assisting companies and individuals nationwide in resolving tax problems with the IRS. We specialize in areas of back taxes such as IRS wage garnishments, IRS bank levies, and unfiled tax returns. Our team of experts comprised of licensed Enrolled Agents, CPAs, & IRS Tax Attorneys can assist you with IRS Audit Representation and Tax Planning. We are one of the leading tax resolution firms in the nation and your go-to tax relief firm that can take you to the Finish Line. Call us today to learn more about our tax relief process and tax resolution services.