IRS TAX DEBT RELIEF
Taxpayers most often find themselves in a situation where they have to keep up with their tax obligations and in some cases they default and they have to live each day with the burden of paying up what they owe. Owing an enormous debt can be very disturbing, and especially a federal tax debt. Meanwhile, the government’s power in collecting this debt is limitless. The Internal Revenue Service (IRS) is the revenue service in the United States of America and is responsible for collecting taxes and bringing defaulting taxpayers into compliance involves harsh penalties and interest. The IRS can even confiscate or place liens on property, invade your bank account, even garnish your paycheck. Leaving a tax debt unaddressed means interest and penalties will continue to pile-up. It can put you at risk of having your wages garnished, your bank account levied and ultimately the IRS even has the power to seize your assets and sell them at auction. The reality is that the IRS has a lot of power they can exercise in collecting tax debts.
However, because what the IRS (and any other tax-enforcement agency) really wants is what the government is owed, there are ways out of tax-debt trouble. Despite its intimidating reputation, it’s not the Internal Revenue Service (IRS)’s intention to punish out of spite. Moreover, because it knows it can collect money only if the money actually exists, the agency has payment options for taxpayers in tough situations.
Therefore, tax debt relief is a very important part of modern day American life. If you are struggling to find a way to get rid of your tax debt, there are a few tax debt relief options you should consider.
WHAT IS TAX DEBT RELIEF?
Tax debt relief is a way that the government helps taxpayers that cannot afford to pay their tax debt. Tax debt relief is an option when you owe the IRS money and can’t afford to make the payment. This tax debt relief comes in the form of a payment plan or a settlement in which the Internal Revenue Service (IRS) agrees to settle your tax debt for less than the amount that is owed.
Who might need tax-debt relief?
1. Taxpayers who defaulted in their payment and lack the resources to pay their debt through personal loan, home equity loan, credit card, investments, etc.
2. Taxpayers in arrears who have come to the attention of private debt collectors hired by the Internal Revenue Service (IRS)
3. Those who have failed to file tax returns for a number of years, but who have managed to operate under the radar of the IRS.
4. Taxpayers, whose debt is so “seriously delinquent” ($50,000 or more) and the IRS have directed the State Department to deny, revoke or confiscate their passports.
IRS Relief Options
As stated earlier, the IRS offers a handful of options for delinquent taxpayers: payment plans, offers in compromise, installment agreements.
Installment agreements work like any other loan: The individual pays a certain amount each month over a period of time (up to six years) until his or her tax debt is paid off completely. Using an installment agreement ends the accumulation of penalties, but, like any loan, it does carry interest. There also will be processing fees.
If you owe less than $50,000 in combined taxes, interest and penalties, it’s possible to apply for an installment agreement.
Taxpayers who can prove that paying the full amount due, now or over time would be ruinous may qualify for an offer in compromise (OIC): that is, an agreement to settle their tax debt for less than the amount owed. The IRS weighs a host of factors, among them ability to pay, income, expenses, and asset equity. The agency generally approves an offer in compromise only when the amount offered represents the most it can expect to collect in a reasonable period of time.
Applications must be accompanied by a payment of 20% of the total offer amount, plus a nonrefundable $205 fee.
If accepted, offers in compromise can be paid two ways: in a lump sum, or periodically. However, because the IRS rarely accepts them, an OIC shouldn’t be your go-to option.
In some circumstances, delinquent taxpayers who have next to no money left each month after meeting essential expenses such as rent, utilities, groceries, commuting, and certain other payments can qualify for a deferral. If the IRS deems taxes “Currently Not Collectible,” the agency will cease collection efforts, giving the taxpayer some breathing room, as well as release from the fear of the IRS breathing down his or her neck.
However, there are downsides: The tax debt remains; the balance will continue to accumulate interest and late penalties; and the IRS may file a lien against the taxpayer’s property (which shows up on credit reports). Oh, and taxpayers expecting a refund in subsequent years can forget about that; the IRS will apply those to any unpaid past-due taxes.
Furthermore, while the IRS can work with a taxpayer to settle his or her tax debt, there are also some companies that can work with the IRS on behalf of the taxpayer to settle the tax debt. Unfortunately, it’s not every company that has the interest of the taxpayer at heart.
HOW TO DETERMINE IF A TAX DEBT RELIEF COMPANY IS LEGITIMATE OR A SCAM;
While there are legitimate tax debt relief firms that have the interest of their client at heart, unfortunately there are also fraudulent firms that pose as genuine tax debt relief firms and inflicting more pain on the taxpayers that seek their help to settle their tax debt. For instance, one sign of a fraudulent firm is if that firm asks or demands for payment before actually doing any work.
SIGNS OF A SCAM;
§ Guaranteeing the immediate reduction or elimination of the IRS tax debt
§ Requesting for the same documentation or ignoring you after you have paid for the services.
§ Promising debt forgiveness
§ Not reviewing your financial condition.