IRS Tax Debt: Seeking Relief

Posted on February 13, 2023

IRS Tax Debt: Seeking Relief

Taxpayers who cannot afford to pay back taxes often ignore the debt due to their inability to pay. Often, they simply stop filing tax returns. Even though this approach might seem to be the most convenient at the moment, it causes even larger tax debt and exposes them to the threat of IRS collection actions. Moreover, by not filing returns, taxpayers are not able to take advantage of the tax credits offered to them, especially low-income groups. Relief from tax debt can be achieved without the payment of the full tax debt amount. Therefore, it is beneficial to resolve tax debt rather than to intensify the problem through inaction.

Tax Debt Relief using Debt Reduction Plans

The IRS has tax debt reduction plans to help taxpayers resolve their tax debt if they cannot pay the full amount of taxes owed. Offer in Compromise and Partial Payment Installment Agreement are IRS tax debt resolution plans through which taxpayers can achieve a reduction in their tax debt amount.

It should be remembered that every tax debt reduction plan has strict qualifying factors. Taxpayers that have income and/or assets that can be used to pay the full tax debt amount without forcing them into a financial crisis cannot qualify for tax reduction reduction plans. The IRS asks taxpayers to explore other options to pay the full tax debt amount, including taking credit. It is only if there is no way to collect the entire amount of tax debt that the IRS agrees to reduce the debt amount.

Before applying for a tax debt reduction plan, it is crucial to consult a tax service because applying for a payment plan that the applicant is clearly not eligible for may attract penalties.

Tax Debt Relief: Penalty, Interest & Collection Actions

The early resolution of tax debt is the most beneficial because it prevents the accumulation of IRS penalties and interest. To encourage taxpayers to resolve their back taxes as early as possible, the IRS charges penalties and interest on any amount of tax debt that remains to be paid. This even applies to cases where taxpayers have already started making payments to fulfill the tax debt (full or partial).

The IRS begins to send notices regarding the payment of tax debt when they discover that you owe back taxes. The IRS notices must be taken seriously because inaction results in aggressive collection actions such as garnishment and levy. After receiving an IRS notice regarding tax debt, taxpayers should consult a tax service to find the most appropriate method to achieve a resolution.

Maximum relief from tax debt can only be achieved if taxpayers take the right steps from the beginning. Acting on time can mean saving oneself from further penalties, interest, and the possibility of collection action.