Are you wondering if IRS debt forgiveness is possible? The short answer is Yes, but it’s best to enlist professional assistance to obtain that forgiveness. Take a look at what every taxpayer needs to know about the IRS debt forgiveness program.
In 2021, over half (57%) of American households didn’t pay any federal income taxes. That’s because the IRS determined those families did not need to pay taxes due to their financial situations. That seems fair and just.
If you also have a big tax burden, it makes sense to recognize that the IRS will work with you. If you can no longer pay off a big tax burden, then the IRS may offer you some different avenues to pursue.
IRS debt forgiveness is one of those options. Learn everything you need to know about this very important tax relief program below.
What Is the IRS Debt Forgiveness Program?
If you’ve incurred a debt with the IRS, then they usually require an upfront, lump-sum payment of the entire amount. If you can’t do that, you’ll start to incur penalties, fines, and more.
You should know that you don’t have to endure all of those consequences if you have a reasonable reason for not paying. Here are a few common types of IRS tax debt forgiveness programs:
- Currently Non-Collectible: Debt forgiveness for those unable to pay
- Installment Agreements: Payment plans (typically 72 months)
- Offer in Compromise: Reduced overall tax burden
- Innocent Spouse Relief: Provides relief for spouses with an undue tax burden
Keep in mind that the IRS will only consider you for tax debt relief if you’re in good standing with the agency. You’ll need to be up to date with your returns, too, so if you haven’t filed your tax returns lately, then that will likely be your first step towards relief.
When to Consider the Debt Forgiveness Program
Are you facing multiple tax problems? Have you accumulated a significant tax debt that you can’t pay off in one lump sum?
It’s time to consider a debt forgiveness program offered by the IRS. It’s important to note, though, that the IRS will take a very good look at your finances before accepting you into the program. They won’t extend any relief options to you if they believe you can pay off your debt.
Is the Debt Forgiveness Program a Good Idea?
Considering the various debt forgiveness options the IRS offers is a good idea if you owe them a chunk of money. If you don’t take action with the agency, then there’s a good chance that your situation will grow in size and scale. You could end up incurring penalties, fees, fines, levies, liens, and other consequences.
If you’re looking for more free guidance and tips, check out our tax help resources.
How Does Tax Debt Forgiveness Work?
So, how does forgiveness work? It’s easier than you’d think!
First, you’ll want to discuss your situation with a tax professional who can advise you on your best options. From there, you’ll likely fill out an IRS debt forgiveness form that outlines your financial situation. The IRS will look over your details, figure out which relief option is best for you, and then get back to you with a potential plan.
Who Is Eligible for IRS Tax Debt Forgiveness?
The IRS has the final say on whether you qualify for debt forgiveness. In general, though, the agency looks for taxpayers who:
- A total tax debt balance of $50,000 or below
- A total income below $100,000 (or $200,000 for married couples)
- A recent drop in income of over 25% for self-employed individuals
If you’re still wondering if you’re eligible for tax relief solutions, let our tax experts help you determine if you qualify. Get in touch with our office today.
Does the IRS Ever Forgive Tax Debt?
If there were a Debt Forgiveness Act IRS agents could follow, then it would be much easier to answer this question. However, the IRS works with taxpayers on a one-on-one basis, so one person’s tax debt burden could be entirely forgiven, while another person could be asked to pay off their debt in full. That’s because the agency only forgives tax debt in situations that warrant it.
With that in mind, the IRS rarely forgives an entire tax debt burden. They might do so if you really are going through a financially difficult time.
What Is the Fresh Start Program With the IRS?
The IRS Fresh Start Program is another term for the various debt forgiveness options offered by the agency. It’s often called a “fresh start” because taxpayers are usually freed from burdensome penalties, interest payments, and more when they seek out true relief with the IRS.
The Fresh Start Program even helps taxpayers remove federal tax liens, levies, and more once they get in good standing with the agency.
Will I Be Penalized for Using the Debt Forgiveness Program?
Too many taxpayers avoid contacting the IRS or tax professionals for help because they know they’re in a bad position. They’re worried that they’ll get penalized further once they acknowledge the situation—but that’s not the case at all. The IRS won’t penalize you for attempting to reconcile a tax debt with them!
Do You Need Additional Tax Help?
If you’re struggling with a massive tax burden or you’ve continued to struggle with tax debt for years, it’s understandable to feel frustrated and out of options. The good news is that there is always hope. So long as you continue to show a good faith effort to cooperate, the IRS will work with you.
On top of that, having a skilled tax expert to represent your interests can help open doors that you didn’t know existed. The IRS debt forgiveness program might be one of those options. Even if you do not qualify for total forgiveness, there are other options that will fit your specific financial needs.
Our team of trained and certified tax experts can help you determine your best options moving forward. If you’ve already incurred penalties, levies, or liens, then getting in touch with a tax representative is even more crucial. Contact our office now at (800) 264-1869 to get started on making your future brighter than ever.