To make tax payments easier for US citizens the government has four major tax relief programs executed by the IRS. You will be able to understand the tax relief programs and consider their pros and cons and then opt for the one you think is most suitable for you once you completed reading this article.
Listed below, are the tax debt relief options.
#1 IRS Installment Agreement
As beneficial as this tax debt relief program is, for some reason it is the least chosen option. IRS installment agreement is a great option for people who find it difficult to pay up their tax debt at once. In a nutshell, the option will allow them to pay monthly until they eventually offset the debt completely. This option also reduces the number of phone calls IRS officers have to make on the taxpayer, as well as the number letters they will write in the long run. Besides, going for this option is a sign of willingness to pay. This is why the IRS particularly likes this tax relief option. In a case where a large amount is owed and the taxpayer can only afford a very small fraction, this may not be the best option. It could be used as an interim option before you decide on the best option to go for.
The Advantages IRS Installment Agreement
It offers more flexibility than other options, as you get to decide how much you can conveniently pay every month. Since it is a preferred option for IRS, they often agree to this option easily. It also prevents frequent IRS action.
The Disadvantages IRS Installment Agreement
For this option, taxpayers usually have to keep track of the payments and it may take a longer period to pay off the debt. However, the worst disadvantage is that your interest will keep on accumulating and you will end up paying much more than you should have paid.
#2 File/Amend Past Tax Returns
Another option to get tax debt relief is to file an amended past tax return. This option is the best for some taxpayers whose liabilities were erroneously overstated in the past. All the difference can be deducted from the tax owed. If a taxpayer has not been able to file his tax returns, an IRS officer can help to file it and also provide minimal deductions. This option is the best for any taxpayer that requires a reduction in liability. This could be because the tax preparer made mistakes and overstated the taxpayer’s liabilities. Another situation where this tax relief option is very helpful is when a taxpayer gets a tax refund that was withheld throughout the previous year or probably because of certain credit. However, you must remember that there is a 3-year ultimatum to claim the refund or forfeit it. So, the tax refund will be reconciled with the current tax balance. This will reduce taxpayers’ liability further.
The Advantages of Amend Past Tax Returns
The main advantage is the reduction in tax liability. It does not only reduce the liability, but it also reduces interest and potential penalty.
The Disadvantages Amend Past Tax Returns
Any taxpayer that goes for this tax relief option will have to cope with the issues of the statute limitations as well as the acquisition of the tax code information.
#3 Offer in Compromise
This is actually the most publicized option and that is why it is the most popular tax debt relief option. Unfortunately, it is not for every taxpayer because its suitability depends on the circumstances surrounding the tax debt. For this option, taxpayers’ tax liability is weighed against their assets, equity, income, and expenses. While there is no fixed rule for this, it has been beneficial for taxpayers with very low income. Even if your income is low, to be eligible for this option, you must be free from any fraudulent or felonious tax returns, all of your estimated tax deposits should be prepared, and most importantly, you should not be bankrupt.
The Advantages of Offer in Compromise
This option also helps to lower taxpayers’ tax liability. It also retains certain assets and lastly, it will get collection actions suspended.
The Disadvantages Offer in Compromise
This will take many years to finish and for this option, you have to deposit higher initial payments. You may need to liquidate your assets. You also need to understand that this option attracts strict penalties for noncompliance.
#4 Taxpayers Can File and Pay Their Tax Late
This simply means that this option can allow you to pay your tax later. IRS has a window of just ten years after which they may not be able to make legal claims towards back taxes. Sounds great right? Thinking of how to weasel your way around for ten years so that you can escape completely right? Here is the other side of the story. Even if the 10-year window shuts down, IRS can still explore other avenues to recover the back taxes. Tax lien and tax levy are common options.
The Advantage of Paying Tax Late
Has the potential to possibly wipe out your back taxes totally
The Disadvantage of Paying Tax Late
The IRS could attach a levy and lien on any of your assets.
In addition, due to potential complexities that may be involved in the implementation of any of the tax relief programs, it is better to hire an experienced tax attorney that will offer a professional guide on how to get rid of tax debt easier.
How our Tax Lawyers Can Help You
There are several ways by which a tax lawyer can help you in your quest for tax debt relief. The issues of tax are usually complex and only experienced tax lawyers that can navigate such waters easily. Tax relief Lawyers will also help to handle disputes before the IRS because they are always looking for opportunities to tax you more. When you apply for tax relief, they often try to pick holes in your application to be able to thwart your efforts. Most importantly, our tax attorneys can guide you to get the best tax relief option.