IRS Tax Debt Relief
Introduction to IRS Tax Debt Relief:
Dealing with tax debt can be overwhelming and stressful for individuals and businesses. Fortunately, the Internal Revenue Service (IRS) offers various tax debt relief programs to help taxpayers resolve their outstanding tax liabilities. These programs are designed to provide options for individuals who are unable to pay their taxes in full, either due to financial hardship or other circumstances. This article will explore some of the common IRS tax debt relief options available to taxpayers.
One of the most common tax debt relief options offered by the IRS is an installment agreement. This option allows taxpayers to paytheir tax debt over time in monthly installments. The IRS offers different types of installment agreements, depending on the amount owed and the taxpayer’s financial situation.
a) Guaranteed Installment Agreement: This type of agreement is available to taxpayers who owe $10,000 or less in tax debt and can pay off the debt within three years. To qualify for a guaranteed installment agreement, taxpayers must have filed all required tax returns and have not defaulted on a previous installment agreement
b) Streamlined Installment Agreement: The streamlined installment agreement may be an option for taxpayers who owe between $10,000 and $50,000. With this agreement, taxpayers have up to six years to repay their tax debt.
c) Partial Payment Installment Agreement: In cases where taxpayers are unable to pay the full amount owed, the IRS may agree to a partial payment installment agreement. This option allows taxpayers to make reduced monthly payments based on their ability to pay. However, the IRS may require a detailed financial statement to assess the taxpayer’s ability to pay.
Offer in Compromise (OIC):
An Offer in Compromise (OIC) is an IRS program that allows taxpayers to settle their tax debt for less than the full amount owed. The IRS may accept an OIC if they believe the taxpayer cannot pay the full tax liability or if there is a doubt as to whether the tax debt is accurate. However, the IRS carefully reviews OIC applications and generally approves them only when the offered amount represents the most they can expect to collect.
To qualify for an OIC, taxpayers must meet specific eligibility criteria and provide detailed financial information to demonstrate their inability to pay the full amount. It’s important to note that applying for an OIC can be complex, and professional assistance from a tax attorney or enrolled agent is often recommended.
Currently Not Collectible (CNC) Status:
If a taxpayer is experiencing significant financial hardship and cannot afford to make any payments towards their tax debt, they may qualify for Currently Not Collectible (CNC) status. When a taxpayer’s account is classified as CNC, the IRS temporarily suspends collection efforts.
To be considered for CNC status, taxpayers must demonstrate that paying their tax debt would create undue financial hardship, such as a severe reduction in their standard of living or the inability to meet basic living expenses. The IRS may request financial documentation to assess the taxpayer’s financial hardship claim.
It’s important to note that while the CNC status provides temporary relief from collections, interest, and penalties will continue to accrue on the outstanding tax debt.
Innocent Spouse Relief:
In cases where a taxpayer’s spouse or former spouse is responsible for the tax debt, innocent spouse relief provides a way to avoid being held liable for that debt. Innocent spouse relief can be sought when one spouse or former spouse understates or fails to report income, claims improper deductions or credits, or commits fraud.
To qualify for innocent spouse relief, the requesting spouse must meet specific criteria and demonstrate that they did not know about, and had no reason to know about, the understated tax liability. The