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Tax Debt Relief: There Are Options

You filed your tax returns on time, hoping to get a good refund. To your dismay, you have a tax debt with the IRS. You’ve had a tough year and have nothing saved up, so what do you do? Don’t panic; some options might be available to you to alleviate your tax debt if you qualify.

Who Should Consider Debt Relief Options?

Anyone who has been delinquent with tax payments should consider knowing tax relief options. If you have ever been unable to pay your taxes or believe you won’t be able to pay the debt in the current year, tax debt relief could be an option. Some situations may also result in adjusted or forgiven penalties.

Tax Relief Options

There are three basic options available when someone seeks tax debt relief. Each main option may offer several choices that will help you select the relief options that are most beneficial for you.

Installment Agreements

An installment agreement is a type of payment plan that the IRS offers to debtors. Most people find that an installment plan is the best option for them. There are several installment plans available to you.

Guaranteed Installment Agreement

This option is best for individuals who owe less than $10,000 in tax debt. That amount does not include interest or penalties. There are qualifications for eligibility:

  • You owe less than $10,000.
  • You’ve filed all returns, paid all taxes owed, and haven’t had an installment agreement in the last five years.
  • You can’t pay your taxes when they are due or within 120 days of the due date.
  • You can pay your debt within three years.
  • You must make your minimum monthly payments, which are calculated by adding the tax liability, penalties, and interest and dividing that number by 30.

Federal tax liens are not filed against you when you choose this plan.

Simplified Installment Agreement

Most people who qualify for a guaranteed installment agreement also qualify for the simplified installment agreement. The simplified option has additional requirements:

  • Taxes, penalties, and interest are $50,000 or less.
  • The balance will be paid off in the next 72 months.
  • You plan to pay equal to or more than the minimum payment that the IRS considers acceptable. The acceptable minimum payment will be $25, or the amount calculated by dividing the tax liability, penalties, and interest by 50.

Partial Payment Installment Agreement

The IRS sometimes enters into an agreement to accept partial payment of the tax liability. Qualifying for these arrangements requires completing a financial statement on Form 433-F that reports living expenses and income. You must comply with a semi-annual financial review if this plan is approved.

Non-Simplified Installment Agreement

Non-simplified installment agreements are for those who owe $50,000 or more. This agreement will not be automatically approved; it must be negotiated with the IRS. A Form 433-F is required as a financial information report such as income, living expenses, debts, assets, and all accounts.

Currently Not Collectible

You can file a currently not collectible status if you cannot pay your tax bill. The debt will be temporarily forgiven for a specified period. Typically, after two years, the IRS will reevaluate your financial situation to see if you can pay the debt. Your financial situation must be such that paying your tax debt to the IRS would pose a serious economic hardship for you.

Offer in Compromise

With this relief option, the IRS agrees to accept less than your total tax debt and call it paid in full. You must show one of the following to qualify:

  • It is doubtful that the debt will be collectible now or in the foreseeable future.
  • Paying all of your debt would cause undue economic hardship.

Talk to the Professionals

If you are in Phoenix and need help understanding your tax obligation or assistance with tax debt relief options, contact Guardian Tax Law for help. They can help you understand the various tax debt relief options.