Here we’ll go through some of the most common tax relief questions and answers. For a rundown on how to resolve a tax relief case, see our tax relief guide. The following questions are answered with as much information as is available.
This post is not legal advice and you should seek help from a tax attorney for further questions. You can also comment on the bottom of the page and one of our attorneys will answer your question.
What is the Fresh Start program with the IRS?
The IRS Fresh Start Program is a program that is designed to allow taxpayers to pay their tax debts in a span of six years for debts under $50,000 and seven years for debts between $50,000 and $100,000. No income or asset information is required to enter into these payment plans.
How much does it cost to use Optima tax relief?
Optima charges an initial fee of $495 to $995 then 10% to 12% of your total tax debt. Their costs are higher than the most tax law firms.
How can I get my tax debt forgiven?
Getting an Offer in Compromise accepted is the closest one can get to have their tax debt forgiven. Although it is not easily obtained by anyone, taxpayers who get an Offer approved can settle their debts for a significantly lower amount. The settlement amount is based on your income, expenses, and available assets.
How can I settle my tax debt?
The only settlement for tax debt is an Offer In Compromise. There are other ways to reduce tax debts as well such as audit reconsideration and penalty abatements, but they do not constitute a settlement.
Does the IRS have a tax forgiveness program?
The IRS offers various ways where taxpayers can have their tax debts partially forgiven. The most popular way is paying the less than the amount owed through an Offer in Compromise. Penalty Abatement, Injured Spouse, and Innocent Spouse requests also are a form of tax debt forgiveness.
Does the IRS forgive tax debt after 10 years?
The Internal Revenue Service (IRS) has 10 years to collect an unpaid tax debt. This time period is extended by a pending bankruptcy, payment plan request, Offer In Compromise or by requesting a Collections Due Process hearing. Once the debt has expired the IRS stops collecting.
See more about IRS and state tax debt expiration on our in depth post about expiring tax debts.
Can I go to jail for not paying taxes?
The IRS will not put you in jail for not being able to pay your taxes if you file your return. However, taxpayers who do not pay their tax debts experience the repercussions of not paying tax debts through wage garnishments, tax levies, and credit damage. Sometimes, the IRS can even hold your passport.
On the other hand, tax evasion or any action taken to evade the assessment of a tax, such as filing a fraudulent return, can land you in prison for 5 years.
What if I can’t pay my taxes in full?
Can IRS debt be reduced?
IRS debt can be reduced in the following ways: Offer In Compromise, Penalty Abatement, Innocent Spouse Request, Injured Spouse Request or if debts expire due to the statute of limitations passing.
Can I negotiate with the IRS?
The IRS uses formulas rather than negotiations to reach payment plan or Offer In Compromise figures. Negotiations with the IRS only tend to take place during audits, tax court, or Offer In Compromise appeals. Everything else is done by way of formula.
Are tax relief companies legit?
While there may be legitimate tax relief companies, there are also plenty of scammers too. When availing for services of tax relief services, you should do this with precaution. When it comes to tax relief companies, make sure to ask if the company is operated by a licensed tax professional. Companies owned by non-tax professionals can close any time and have no legal obligation to complete your case.
Can you refuse to pay taxes?
No, you can’t. A common argument made by those who refuse to pay taxes is that you can invoke the First Amendment to deny paying of taxes due to religious or moral beliefs—an opposition to war, for example, or to policies you deem as discriminatory against immigrants. But the IRS explains that the First Amendment “does not provide a right to refuse to pay income taxes on religious or moral grounds or because taxes are used to fund government programs opposed by the taxpayer.”
How much will the IRS settle for?
The IRS does not have a specific minimum or maximum amount for settling taxes. Taxpayers who have a tax debt they cannot pay can settle their tax debt for less than the full amount owed through an Offer in Compromise. If that taxpayer is insolvent, they may be able to settle large debts for just $50. When applying for a settlement offer, taxpayers may need to make an initial payment. The IRS will apply submitted payments to reduce taxes owed.
Do I qualify for the Fresh Start initiative?
To qualify for tax relief under the IRS Fresh Start Program you must:
- Prove you aren’t financially capable to pay off your tax debt within 72 months for debts under $50,000
- File all the tax returns you’re legally required to file. Even if you can’t you can’t afford to pay them, file them
- Make all required estimated tax payments for the current year. This only applies to self-employed workers and small businesses owners
- Make all required federal tax deposits, if you own a business with employees.
- Not be in an open bankruptcy proceeding
Do I qualify for Offer in Compromise?
The IRS looks at your basic information, status, assets, and income when assessing if you qualify for an Offer in Compromise. Most people that qualify for an Offer In Compromise are insolvent. A taxpayer must file all required tax returns first before the IRS can consider a settlement offer. When applying for a settlement offer, taxpayers may need to make an initial payment. The IRS will apply submitted payments to reduce taxes owed. The IRS has an Offer in Compromise Pre-Qualifier tool on IRS.gov.
Is offer in compromise a good idea?
An Offer in Compromise can be a good idea if you have a strong chance of qualifying for it. However, if you think you don’t qualify for an OIC, it’s better not to risk it. Submitting an OIC will extend the period of the Statute of Limitations on your tax debt. Apart from that, there is an application fee of $186. Taxpayers with old debts that will be expiring soon may want to avoid an OIC.
Can you get away with not paying taxes?
Yes, there are some people who do get away with not paying taxes. There are thousands of peoplethat try to evade taxes and not disclose all their income. Many of them get away with it but every year a big majority of such tax evaders are caught and penalized. A legal way people get away with not paying taxes is by reaching the Statute of Limitations.
What happens if you Cannot pay tax?
If you fail to pay your taxes on time, you incur penalties. You’ll pay a minimum of $135 or 100 percent of the taxes you owe (whichever is less) for late payment. If you file your taxes but don’t pay them, the IRS will charge you a failure-to-pay penalty. It’s also possible for the IRS to levy your assets or garnish your wages.
What happens if you get audited and fail?
Since the IRS chooses tax returns for an audit intentionally and randomly, being audited does not automatically mean that you have to pay penalties. However, the IRS will examine your tax return to uncover any existing errors, problems, or outstanding balance of unpaid taxes. Depending on the deficiency or the amount of unpaid taxes, your tax return can be subject to additional tax interests, civil penalty, civil fraud penalty, or criminal penalty. The amount and the type of tax audit penalties will depend on the severity of the deficiency found in your tax return.
How long can you get away with not paying taxes?
This depends on the information reported to the IRS. Some people get away their entire live without paying taxes because they are not working within any systems that the IRS controls. For example, someone who cuts grass, is paid in cash, and does not use banks could probably get away without paying taxes, even though legally they should be paying.
Can the IRS put me in jail?
In the US, no one goes to jail for owing taxes. You can go to jail for cheating on your taxes, but not because you owe back taxes and not able to pay. In fact, it would take a lot for the IRS to put you in jail for fraud. Furthermore, the IRS cannot simply take your bank account, your car or your house.
Can the IRS collect after 10 years?
In most cases they cannot, but there are events that can extend this time period. The IRS must follow the 10 year Statute of Limitations when collecting on tax debts. Bankruptcies, being out of the country for more than 6 months, a pending Offer In Compromise, a pending Collection Due Process hearing, and a pending payment plan request can all extend this time period for collections.
Can IRS debt be forgiven?
IRS tax debt can be forgiven in the following ways:
- Offer in Compromise – settling your tax debt for less than the amount you owe.
- Currently Not-Collectible Status – technically, your tax debt is not forgiven, but the IRS will hold off making collections from you until you’re capable to pay your tax debts.
- First Time Penalty Abatement- the IRS will lift off the penalties you have. That includes penalties for failure to file, failure to pay, and failure to deposit. The IRS also removes interest related to those penalties.
- Innocent Spouse Program- provides relief from additional taxes you owe if your spouse or former spouse failed to report income, reported income improperly or claimed improper deductions or credits. This only applies to individual income or self-employment taxes.
Will the IRS take your refund if you are on a payment plan?
Yes. One of the conditions of having an installment agreement is that the IRS will automatically apply any refund due to you against taxes you owe. Because your refund isn’t applied toward your regular monthly payment, continue making your installment agreement payments as scheduled.
How much does an Offer in Compromise cost?
The IRS charges a $186 application fee and 20% down payment of the offer. Most tax relief experts will charge $3,000 to $7,500 to complete an Offer In Compromise. Some law firms, like ours, review self-prepared offers for $350.
Will the IRS settle for less?
Yes, if you qualify and get accepted for an Offer in Compromise, you can pay your tax debt for less of the amount you originally owe. The settlement amount is something that will be agreed between the taxpayer and the IRS.
Who qualifies for IRS Offer in Compromise?
There are several factors the IRS looks at in order to be eligible for an OIC. The IRS looks at filing status, assets, and income. Generally, the more you can prove to them that you don’t have the money to pay your tax debt, the higher the chance for qualifying for an OIC. Other eligibility requirements are the following:
- No pending bankruptcy proceeding
- All tax returns should be filed
- Business owners should be up to date on tax deposits
- You should have no pending DOJ investigations
Getting more help on tax relief questions
Tax relief is a big, complex area of law and there can be a lot of questions. There’s also a lot of false information put out there by tax relief companies. Looking for solid answers to your tax relief questions? Post a comment below and one of our attorneys will answer for you. Looking to resolve your debts once and for all? Go to our Contact Us page and have a free consultation with one of our experienced tax attorneys.