Tax bills are no joke, and they’re never a fun piece of mail to receive. Luckily, tax relief measures can make a significant difference. Although the IRS will inform you how much you owe, their agents will understand if you find yourself short on cash. Times are tough all around! Think of how this process works much in the same way you could work out a debt repayment plan – smaller, easier-to-swallow chunks instead of enormous lump sum payments.
Tax Relief at a Glance
Even with a tax relief plan in place, you are still on the hook for paying your taxes. Your obligation, in this case, still exists. It’s a more reasonable way to eliminate your tax debt – perhaps if you owe back taxes? Anyone victimized by natural disasters – such as hurricanes or wildfires – also qualifies for this assistance. What does this mean? They are more likely to receive payment deadline extensions. Likewise, they can claim casualty losses on their federal income tax returns.
Repaying the IRS Itself
Your first pathway to tax relief involves working out a deal with the Internal Revenue Service. In this scenario, the full balance of what you owe is divided into smaller pieces. For long-term payments to be accepted, you must owe $50,000 or less. This total is calculated based on the amount of money you are on the hook for; taxes, penalties, and interest combined. However, short-term payments are valid agreements as well. The threshold for this arrangement is $100,000 at most. The setup fee is $149, not counting other penalties and interest you are responsible for covering.
The Offer in Compromise
The offer in compromise is another solution for overcoming tax-related difficulties. As the IRS itself states, [it] “may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship.” So, if that’s the case, the IRS looks at various relevant conditions, such as if you can pay, your overall income, what expenses you have, and the assets you have available to you.
Relief from Penalty/Interest Abatement
When the IRS grants you penalty relief, it means that you are absolved of the penalties assessed to your extant tax bill. While there are still some strict conditions attached, it can be a ray of light in an otherwise gloomy time. Interest abatement, meanwhile, cancels the interest associated with the unpaid taxes that you haven’t addressed yet. Please note, however, that this pardon is extremely rare.
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