If we have a debt with the IRS and cannot make the corresponding payment, we can receive fines and penalties. However, if we have a valid reason for not making the payment, there are a few IRS tax debt forgiveness programs:
- Currently Non-Collectible: this is a tax debt forgiveness for those who cannot pay.
- Installment Agreements: these are payment plans that are made monthly, usually for 72 months.
- Offer in Compromise: in this type of plan, the tax burden is reduced for the person who requests it.
- Innocent Spouse Relief: This plan relieves spouses of a tax burden that does not apply to them.
It is important to note that the IRS only provides tax debt forgiveness or relief plans to those who are current on their tax obligations and tax returns. If we have delinquent tax returns, the first step to receiving any relief is to be present.
If we owe a large sum of money to the IRS, it is a good idea to take some of the debt forgiveness plans offered by the agency because if we do not take action, our debts will grow, and we could incur penalties, fines, liens, and other consequences.
How does the forgiveness of tax debt work with the IRS?
The first thing to do when we owe a large amount of money to the IRS is to consult with a tax professional to receive advice on the options in each case. Next, an IRS debt forgiveness form must be completed, which describes the individual’s current financial situation and will be reviewed by the IRS.
After the review, the IRS will determine which debt relief option is most appropriate for the particular case and will contact the individual to propose a forgiveness plan.
Who is eligible for IRS tax debt forgiveness?
The IRS has the final say on who qualifies for tax debt forgiveness and who does not. The IRS generally looks at three factors to see if someone qualifies for debt forgiveness:
- First, the total tax debt balance must be equal to or less than $50,000.
- The total income for a single person must be less than $100,000 and less than $200,000 for married couples.
- If the person is self-employed, they must have had a recent drop in income of more than 25%.
Is it possible for the IRS to forgive a tax debt completely?
It is a difficult question to answer, as the IRS works with each taxpayer individually, reviewing each person’s financial status and conditions in detail. The agency only forgives tax debt in financial situations that justify non-payment of the debt.
It is why one person’s tax debt burden may be completely forgiven while another person may be required to pay their debt in full. However, it is important to remember that the IRS rarely fully forgives a tax debt.
What is the Fresh Start program with the IRS?
The IRS Fresh Start program is another name for the various debt forgiveness options offered by the IRS. It is known this way because taxpayers who use these debt forgiveness options are relieved of paying high penalties and interest payments.
Is it possible to be penalized for using the IRS debt forgiveness program?
Many taxpayers avoid contacting the IRS for help with their debts because they fear they will be penalized when they come to terms with the bad financial situation that has led them to default on their tax obligations. This belief is false. The IRS does not penalize any taxpayer for requesting help or using one of the debt forgiveness program options.
For years I have studied American finance regulations. All the information in this blog is sourced from official or contrasted sources from reliable sites.
Salesforce Certified SALES & SERVICE Cloud Consultant in February 2020, Salesforce Certified Administrator (ADM-201), and Master degree in “Business Analytics & Big Data Strategy” with more than 13 years of experience in IT consulting.