In certain conditions, when you are not able to pay your tax debt, the Internal Revenue Service allows debt forgiveness. This program is called IRS Debt Forgiveness Program, and mainly, the tax exemption is on the basis of how much you owe and how much you are capable of paying back reasonably. The program allows tax to be partially forgiven for particular taxpayers under certain circumstances. If the IRS enforces a collection action in these circumstances wherein you might end up in a financial crisis and lose all financial security, IRS cannot collect the back taxes. Read on to know all you need to know about the IRS debt forgiveness program.  

Lookout for IRS Collection Actions

While the IRS is liable to forgive you under certain situations, you are still supposed to reach out for assistance or forgiveness. If you haven’t done that, IRS collection actions can very well catch you off-guard to retrieve the tax you owe. Initially, these actions will seem not to make much of a difference. You might receive notices, emails, and notifications as reminders and then eventually as warnings. Post that, you should be on the lookout for IRS collection actions that are intense. For instance, they might even hire private debt collection agencies in order to track you down.  

Tax Liens

Tax liens can be imposed on you by the government. This means that the government can have a claim against your property if you fail to pay your tax debt. This is one of the many aggressive actions that the government can take to recover the tax debt. IRS uses tax liens to protect the government’s money and enables the money from the sale of the property to be prioritized in covering the debt. The lien is issued 10 days from notice from the IRS, and the taxpayer is notified after being issued.  

Tax Levy

The government can also legally seize your property, which is called a tax levy. This money is used to recover the money you owe for your tax to the government. A notice for the same is issued beforehand to the owner of the property. The levies can be placed on personal, tangible property like home, car, boat, etc. or assets like bank funds, tax refunds, and wages. Tax Levy is much more serious than a Lien because, in this case, your property will be taken immediately. Even though the notice is issued, the government has “the power of distraint and seizure by any means,” so there isn’t much you can do.  

Wage Garnishment

Wage Garnishment is another means of money retrieval by the IRS. This allows a notice being issued to your employer who will be paying a good chunk of your salary to the IRS, and only a percentage will be given to you after that payment. If you can prove that this process is causing you a significant financial strain while providing for basic necessities, they can cut back a portion, drop the method entirely, or put a hold on it to give you time to return the IRS the money you owe.  

Offer in Compromise

If you have resources to pay a part of the amount you owe the IRS, you can apply for an Offer in Compromise to resolve the remaining amount. This payment plan can be life-changing, but it is not easy to qualify for it. Your ability to pay, including your wages, expenses for necessities, and asset equity, are considered to determine your eligibility for Offer in Compromise. You should consult a tax professional to help you know how good your chances of getting an Offer in Compromise is. Your debt can be reduced significantly depending upon your financial position if the IRS accepts you.