Tax resolution/relief financing refers to the set of services aimed at resolving outstanding tax debts and providing financial relief to individuals or businesses. It involves negotiating with taxing authorities, such as the Internal Revenue Service (IRS) or state taxation bodies, on behalf of the taxpayer. The goal is to reduce, or sometimes eliminate, the amount owed or to arrange a more manageable payment plan. This process may involve strategies like an Offer in Compromise, installment agreements, penalty abatements, or even obtaining currently non-collectible status.
Financial relief in this context implies the easing of the financial burden faced by taxpayers due to their tax debts. The tax relief process might include lowering the tax liability by reducing the amount of taxable income, adjusting tax deductions, or offering tax credits. Certain tax resolution firms specialize in tax relief financing, providing assistance to those struggling to navigate the complexities of tax laws and policies. The ultimate objective of tax resolution and relief financing is to help taxpayers regain financial stability by resolving their tax issues in the most beneficial way possible.
Tax Resolution/ Relief Financing Options
Tax Resolution/ Relief Financing options are strategies and programs designed to help individuals and businesses resolve their tax problems with the Internal Revenue Service (IRS) or other tax authorities. These options can be useful when you owe back taxes, are facing penalties and interest, or are dealing with other tax-related issues.
Offer in Compromise (OIC)
An Offer in Compromise (OIC) is a program offered by the Internal Revenue Service (IRS) that allows individuals or businesses to settle their tax debts for less than the full amount they owe. It’s typically an option for taxpayers who cannot pay their full tax liability, or for whom doing so would create financial hardship. The IRS considers the taxpayer’s ability to pay, income, expenses, and asset equity to determine an offer they’re willing to accept. It’s crucial to note that not everyone qualifies for an OIC, and acceptance by the IRS is not guaranteed.
An Installment Agreement is another tax resolution strategy available for taxpayers who cannot pay their tax debt in full at once. This option allows individuals or businesses to make monthly payments towards their tax debt over time. The IRS offers various types of installment agreements, including guaranteed, streamlined, partial payment, and non-streamlined agreements. The type of agreement a taxpayer qualifies for depends largely on the amount of tax owed and their specific financial circumstances. It’s important to remember that while an installment agreement may make the debt more manageable, interest and penalties will continue to accrue on the unpaid portion of the debt until it is paid in full.
Currently Not Collectible (CNC)
Currently Not Collectible (CNC) is another tax resolution/ relief financing option that might be available to taxpayers who are experiencing extreme financial hardship. If the IRS determines that you cannot pay any of your tax debt without causing undue hardship, it may temporarily delay collection efforts and classify your account is Currently Not Collectible. During this time, the IRS will not pursue collection actions or levy your assets and income. However, the tax debt does not disappear, and penalties and interest will continue to accrue. The IRS may also file a tax lien to protect its interest. It’s critical to note that the CNC status is often temporary, and the IRS can reevaluate your ability to pay at any time.
Innocent Spouse Relief
Innocent Spouse Relief is a provision of the tax code designed to protect one spouse from the financial actions of their partner. If your spouse or former spouse incorrectly reported or underreported income on a joint tax return, you might find yourself facing tax liability, including interest and penalties. However, if you can prove that you were unaware of these discrepancies when signing the joint return, Innocent Spouse Relief may absolve you of responsibility for paying these additional amounts. It’s important to understand that this form of tax relief applies in very specific circumstances and the IRS has stringent requirements to qualify for it. If you believe you may be eligible, it’s critical to consult with a tax professional who can guide you through the process and help you present a strong case to the IRS.
Bankruptcy and Tax Debt
Bankruptcy is a legal status applied to individuals or businesses that cannot repay their debts. While typically seen as a last resort, it is also an option for those dealing with unmanageable tax debt. Under U.S tax laws, certain tax debts may be discharged, or wiped out, through bankruptcy.
Tax Resolution/ Relief Financing Programs
Tax Resolution/ Relief Financing programs are strategies designed by federal, state, and local governments to reduce the tax liabilities of certain individuals and businesses. These programs are typically targeted at taxpayers who are experiencing financial hardship, but they can also be available to those who qualify for specific deductions, credits, or exclusions. Below are some of the most common tax relief programs:
Fresh Start Program
The Fresh Start Program is an initiative from the Internal Revenue Service (IRS) aimed at making it easier for individual taxpayers to pay back taxes and avoid tax liens. The program provides avenues for taxpayers to resolve their tax debts through measures such as increased threshold for tax liens, installment agreements, and offers in compromise.
Property Tax Relief Programs
Various states offer Property Tax Relief Programs that reduce the property taxes of qualifying homeowners. These programs often target seniors, veterans, disabled individuals, and low-income households. The specifics of these programs, including the qualification criteria and the amount of relief provided, vary by state.
Earned Income Tax Credit (EITC)
The Earned Income Tax Credit (EITC) is a federal tax credit program for low- to moderate-income working individuals and couples, particularly those with children. The amount of EITC benefit depends on the recipient’s income and the number of children they have.
Tax Forgiveness Programs
Certain situations may qualify taxpayers for Tax Forgiveness Programs. These programs forgive a portion or all of a taxpayer’s tax debt, often due to circumstances beyond the taxpayer’s control. For instance, the IRS may forgive tax debt resulting from a natural disaster.
Tax relief programs provide essential help to taxpayers who are struggling with their tax debts. Each program has its own specific eligibility requirements, and it’s important to consider all potential options to determine the most suitable one for your situation. Speaking with a tax professional can provide valuable guidance in navigating these complex options and ultimately resolving tax issues effectively.