You filed your tax returns right on time, hoping to get a nice refund. To your dismay, you owe the IRS tax debt. You’ve had a rough year and have nothing saved, so what do you do? Don’t panic;some options could be available to you to relieve your tax debt if you qualify.
Who Should Consider Debt Relief Options?
Anyone who has been delinquent with tax payments should consider learning about tax relief options. If you’ve ever been unable to pay your taxes or think you won’t be able to pay the debt in the current year, tax debt relief could be an option. Some situations might lead to adjusted or forgiven penalties as well.
Tax Relief Options
There are three basic options available when someone seeks relief from tax debt. Each main option may offer several choices that will further help you select the relief options that are most beneficial to you.
Installment Agreements
An installment agreement is a form of payment plan that the IRS offers debtors. Most people find that an installment loan is the best selection for them.Several installment plans are available to you.
Guaranteed Installment Agreement
This option is best for people who owe less than $10,000 in tax debt. That amount doesn’t include interest or penalties. There are conditions for qualification:
- You owe less than $10,000.
- You have filed all returns, paid all taxes owed, and not entered an installment agreement within 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 off your debt within three years.
- You must pay your minimum monthly payments, which are calculated by adding tax liability, penalties, and interest and dividing that number by 30.
No federal tax liens are filed against you when you choose this plan.
Streamlined Installment Agreement
Most people who qualify for a guaranteed installment agreement also qualify for the streamlined installment agreement. The streamlined option has additional requirements:
- Taxes, penalties, and interest are $50,000 or less.
- The balance will be paid in the next 72 months.
- You plan to pay equal to or more than the minimum payment the IRS finds acceptable. The minimum acceptable payment will be $25, or the amount calculated by dividing tax liability, penalties, and interest by 50.
Partial Payment Installment Agreement
The IRS will sometimes enter an agreement to accept partial payment of the tax liability. Qualifying for these arrangements requires completing a Form 433-F financial statement that reports living expenses and income. You must comply with a biannual financial review if this plan is approved.
Non-Streamlined Installment Agreement
Non-streamlined 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 report of financial information like income, living expenses, debts, assets, and all accounts.
Currently Not Collectible
You can file a currently not collectible status if you can’t pay your tax bill. The debt will be temporarily forgotten for a set time. Typically, after two years, the IRS will reassess your financial situation to see if you can pay the debt. Your financial situation must be such that paying your IRS tax debt will be a severe economic disadvantage to 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’s doubtful that the debt would be collectible now or in the foreseeable future.
- Payment of your entire debt would cause undue economic hardship.
Talk to the Professionals
If you’re in Phoenix and you need help understanding your tax liability or help with tax debt relief options, contact Guardian Tax Law for assistance. They can help you understand the various tax debt relief options.
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