According to the Internal Revenue Service, about 16% of all federal taxes owed go delinquent. This can equate to $440 billion in unpaid federal revenue, although after the IRS successfully completes delinquent revenue collection efforts, that number falls a bit. The reasons taxpayers end up owing are numerous – financial ups and downs, sudden shifts to the economy, or they just got behind through inattention or poor financial planning. But once you have a bill owed to the IRS, there are ways to cut it or reduce it.
Despite some 20 million Americans owing back taxes in 2019, only a fraction of a percent, 50,000, of those filed for tax relief. Read on to see how you can save money on your owed back taxes.
Tax debt relief comes in the form of…
- Offer In Compromise
- Tax Debts Expiring
- Penalty Abatement
Offer In Compromise
An Offer In Compromise is settling for less than the full amount owed. Most successful Offers In Compromise are based on financial data. There are other types of Offers as well but they are typically much harder to get. Often you will see settlements for a tiny fraction of the full amount owed if you qualify.
Tax Debts Expiring
Tax debts typically expire 10 years after they are assessed. Some time can be added to that 10 years making the time frame longer. For example, a pending bankruptcy, Offer In Compromise, or setting up a payment plan can add time. Sometimes a client will get on a partial pay installment agreement, meaning they are just paying until the debt expires. Some clients will sit in Currently Not Collectible status until the debt expires, which is effectively a $0/month payment plan.
Penalties on the tax debt can sometimes be removed from the debt. For the first year owed in a series of years, you can get a first-time penalty abatement. This one is easy to get as long as the three years prior to that year no penalties were ever assessed. For other tax years “reasonable cause” for not paying the tax debt on time must be shown and these are difficult to prove.
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