Tax debt can be a huge burden. If you or someone you know has unpaid taxes, the Internal Revenue Service (IRS) may be seeking payment of those funds. But is the IRS forgiving tax debt? It’s important to understand the rules and regulations when it comes to your tax debt situation so that you can make the best decisions for yourself and your financial future. Let’s take a look at some of the information you need to know about forgiving tax debt from the IRS.
The IRS offers several different types of forgiveness programs that are available for people who have unpaid taxes. Depending on your circumstances, one of these programs may be available for you. Some of these include:
This program allows taxpayers who cannot afford to pay their full balance to negotiate with the IRS for a reduced balance or payment plan with monthly installments. The criteria used by the IRS to determine eligibility vary depending on each person’s financial situation.
This program allows taxpayers to temporarily suspend collection efforts while they work out their financial difficulties. To be eligible, individuals must demonstrate that they cannot pay their taxes due at this time and that any payments would create an undue hardship on them or their family members.
This program is designed for individuals who were married at the time that taxes were filed but did not file jointly with their spouse, so only one spouse is liable for any unpaid taxes due from that filing period. Eligibility requirements vary depending on each person’s current marital status and other factors.
This program is similar to Currently Not Collectible Status in that it allows taxpayers to temporarily suspend collection efforts while they try to resolve their financial difficulties; however, non-collectible status requires a payment plan between the taxpayer and the IRS for collection activities to cease.
Anyone who owes money they can't afford to the IRS should look into a payment plan or some kind of tax forgiveness program. By law, if paying taxes would cause someone financial hardship, the IRS cannot attempt to collect them. However, the taxpayer first has to demonstrate their reasons for not being able to pay up.
Although it is not common, the IRS does have programs that permit taxpayers to pay less than they owe and still settle their liabilities.
If you owe the IRS several thousand dollars in back taxes and cannot make monthly minimum payments on an installment agreement, also known as a payment plan, usually it is best to seek out a forgiveness program.
The IRS has multiple ways of collecting money from taxpayers who owe taxes, which include the following:
The IRS initiates enforcement actions by filing a lien against a taxpayer's possessions, for example, boats, houses, or cars.
A tax lien is when the government legally claims an asset which prevents it from being sold or transferred. The IRS will not seize the asset immediately, but usually, the taxpayer cannot sell it.
The IRS can seize a taxpayer’s assets if they fail to pay their taxes. This includes physical belongings, as well as bank accounts, retirement savings (including IRAs and 401ks), inheritance, and other financial sources.
If someone dies before paying their back taxes, the IRS might take away their assets or demand payment from their next of kin.
The IRS has the authority to withhold funds from a person's paycheck to recoup owed taxes. Although they can't deplete an entire paycheck, it could leave a taxpayer with little money.
The IRS garnishes wages by taking a portion of someone's paycheck each pay period until the taxes owed are satisfied. This type of levy is done by contacting a taxpayer's employer or hiring a third party.
Tax debt can be overwhelming, but if you are facing unpaid taxes due, there may be options available through which you can resolve your problem without having to pay back everything owed in full right away or face hefty penalties or even jail time due to nonpayment or delinquency issues. You must research all available options thoroughly before deciding how best to proceed with resolving your tax debt issue as soon as possible so that further complications do not arise from delinquent accounts with the IRS. Knowing what type of tax forgiveness solutions are available will help ensure that you make an educated decision about how best to proceed with settling your tax debt issue once and for all.