Tax relief is a category that encompasses many options. Here we go through and explain the various options for tax relief. Offer In Compromise tends to be the best solution for most cases that qualify, but there are other options that still help if you do not qualify.
See our video explanation of tax relief options if you prefer to watch it. Keep reading for the written explanation.
Options for tax relief: Offer In Compromise is best
In the vast majority of tax debt cases, Offer In Compromise is the best solution if you qualify. The trick is not as many people qualify as tax relief companies make you think.
Here are the options for tax relief:
- Offer In Compromise
- Currently Not Collectible Status
- Payment Plan
- Pay In Full
- Penalty Abatement
Offer In Compromise: Settling for less
The best option for most tax debts. Qualifying is based on the following:
- Total Assets
- Income vs Expenses
- Dissipated Assets
- File missing required tax returns
Currently Not Collectible Status: Pay $0/Month
Effectively a payment plan for $0/month. The IRS then can ask for financial data again at a later date. If income stays the same, Currently Not Collectible status is generally renewed.
How to get Currently Not Collectible Status:
- File required missing tax returns
- Submit financial statement (433A or 433F, depending on case assignment) and supporting documentation
Upside is the debt might expire before you are required to make any payment.Downside is if you make more income and the debts are not expired, the IRS might be asking for a payment at a later date.
Payment Plans: The fastest result
Setting up a payment plan with the IRS will release any garnishments. It does not save any money unless a penalty abatement is approved as well, which we will cover later here.
Payment plan options:
- Under 50K Balance = 72 month pay plan, lien free
- 50K to 100K balance = 84 month pay plan, with lien
- Payment plan based on financial data = length depends on data, lien filed if balance is over $10,000
Most payment plan cases should have a penalty abatement requested.
Pay In Full: If you can do it you might want to
Payment in full is another way to get tax relief in the sense it will stop any garnishments and stops the IRS collection process. If you have more cash than the tax debt, often the best move is to pay it off and request a penalty abatement. Most people reading this are probably not in that category.
Penalty Abatement: First year is easy
Whether doing a payoff or payment plan, you might qualify for a penalty abatement. Most taxpayers qualify for a first time penalty abatement, and we will have a link to our page on that below. Getting penalty abatement on other years requires reasonable cause. Basically, you need to have a good reason that the taxes were not paid and/or filed on time.
Easier way to deal with tax relief
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