You can pay your taxes via the IRS Fresh Start program also known as IRS tax forgiveness programs.
Sometimes, we forget to file our returns. Some people have it worse—they go through difficult times and no longer have the financial means to pay their taxes.
If you are facing an IRS tax debt problem, what should you do? I am often asked, “what are the IRS tax relief programs and how can I get them?” Today, that is exactly what I am sharing with you.
Offer in Compromise
The Offer in Compromise is a tax program from the IRS where you can settle your tax debts less than the full amount that you owe. It allows you to settle your financial burden without paying your entire tax liability.
The thing with this program is that the IRS considers several factors before your application gets approved.
When you apply for the IRS offer in Compromise, here are some of the things you need to think about:
- Ability to pay – the IRS will determine your capacity to pay. Among other things, they will investigate your financial status, your assets, and many other things.
- Income – the government needs to know whether or not you have a source of income. If you do, they need to know how much you are earning.
- Expenses – they also check what expenses you have. If you are in debt, they need to validate this with creditors.
- Asset equity – the government will check if you own properties such as cars, lots, and houses. If there is a possibility of selling these assets legitimately, they will take this into the equation before they decide whether you qualify for the IRS payment plan or not.
Not everybody is eligible for this program. The first thing you have to do is to apply for it. However, you cannot apply for eligibility if you did not file tax returns for the previous year. It is best to consult a professional to get help.
Tax Debt Relief
Tax debt relief is a government program that makes it easier to pay your back taxes. It allows people to avoid huge penalties and jail time. We can call it the IRS hardship program since it is for people going through financial troubles.
The tax debt relief comes in the form of a payment plan or a settlement. In a payment plan, the IRS will give you some months to pay what you owe. In return, you have to pay what you owe in increments.
In a settlement, the IRS will charge less than what you owe. You will pay a lump sum for now and then pay the rest within several months.
Before you even consider doing this, you need to have a plan. For example, you need to know your options before the deadline, which is April 15. The last thing you want is to go to the IRS because someone taught you how to settle with the IRS by yourself and then realize that you do not qualify.
Also, I want to point out that the tax debt relief program is not for everybody. At best, it is reserved or people who:
- Went through a disaster like a hurricane or an earthquake
- Have an unexpectedly high tax because of a surge in income
There are several options if you apply for tax debt relief programs, which I will describe below.
- Installment Agreement – you pay your back taxes in multiple increments. Usually, the IRS could grant you up to 72 months to pay all your debts. Please note that this only applies if what you owe is less than $50,000.
- Innocent Spouse Relief – if you went through a divorce and you can prove that you have no liability with your ex-spouse’s taxes, you can get relief. Before you qualify, you must file taxes jointly and then prove your innocence.
- Offer in Compromise – in this situation, you make an offer to the IRS. You will pay less than what you should pay.
- Currently Not Collectible – you can only get this if you can prove that paying any amount of tax is detrimental to your living condition. It does not absolve you from paying, but the IRS will not bug you for not paying until you have recuperated financially.
If you think you cannot qualify for the tax debt relief program, your only course of action is to pay what you owe. You can use a credit card, get a HELOC, or borrow from your 401K. You can also learn a new skill like freelance writing and earn money on the side.
While there are ludicrous stories of people paying only $10 for a tax debt of $10,000, this kind of settlement rarely happens. If at all, these stories get highlighted by the media because they are fantastic stories that get a wide audience.
However, it is rather an exception than the norm. The IRS will do what it can to charge you what you owe. You can only get significant abatement from your tax debts if you can prove that you are in deep financial trouble.
IRS Forgiveness Program
Some people asked me about the IRS one time forgiveness 2021. I thought I might as well explain it here.
It is the same as what I have explained earlier. Some people think that they can get away with taxes, and some even call it the IRS fresh start program.
This information is wrong. If anything, the IRS does not cancel out your debt. You still have to pay what you owe, or at least a portion of it.
For this forgiveness program to work, the following things must happen:
- You have to apply to the program and secure an acceptance.
- You must agree to stay current in your tax returns moving forward
- You must agree with the terms that the IRS asks of you
- You must allow the IRS to review your financial status from time to time
- You pay your taxes as agreed with the IRS
As you can see, your only recourse is to settle. There is rarely any instance that the IRS will forgive your taxes. Even businesses that file for bankruptcy have to pay. They sell their assets, and they pay part of their due taxes from this sale.
You cannot get away from taxes. The first thing you have to do right now is to change your mindset. Save money so if something bad happens, you can still pay what you owe. The last thing that you want is to deal with the government.
Make it a regular habit to set aside money from what you earned. Keep them and then consult a professional accountant who will guide you through the entire process. Get an accountant you can trust, not one who would embezzle your money.
Summary: What Are the IRS Tax Relief Programs?
The tax debt relief programs of the IRS come in many forms. While you can apply for these things on your own, it is best to consult an accountant. It is not unusual for me to hear from clients how they got misinformed.
They have expectations that never came to fruition, all because they relied so much on advice from the internet or people who made unusual claims. Remember that the IRS deals with tax cases on a case per case basis—what worked for one person does not mean it will work for you.