IRS Tax Debt Forgiveness | Flat Fee Tax Service
Updated: Nov 17, 2019
The IRS understands that every tax debt will never be paid. That’s why the government offers IRS tax debt forgiveness when you can’t afford to pay your tax debt.
You do not have to be destitute to qualify for IRS tax debt forgiveness. You have to lack assets and not have enough income to pay the tax debt after your "allowable expenses" are deducted.
Under certain circumstances, taxpayers can have their tax debt drastically forgiven. When the IRS considers forgiving your tax liability, the IRS will look at your present financial condition first. This means the IRS can’t collect more than you can reasonably pay. If any collection action would force you into a financial crisis where you lose all sense of financial security, the IRS can’t collect the back taxes.
You Must Know
What You Owe
Before applying for IRS programs, find out how much in taxes you owe to the IRS. Knowing where you currently stand with your tax debt is vital when it comes to asking for IRS forgiveness. The IRS wants to do 2 things. Collect as much money as possible and close cases. An IRS tax forgiveness will accomplish both of these goals.
There are many different ways to find out how much you owe, including checking online through the IRS’s new portal, calling the IRS, mailing the IRS a form, and having a tax professional do the research for you. No matter how you figure out how much you owe in back taxes, you’ll need to know before seeking forgiveness. If you do nothing, the irs will take very aggressive collection actions against you such as tax levy, IRS wage garnishment and tax liens.
A tax levy is the government’s legal seizure of your property to satisfy your outstanding unpaid tax debt. You should receive a notice of levy from the IRS, which will let you know that they are planning to pursue levying actions against you.
A tax levy can be placed on personal property like your home, car, or boat. They can also be placed on your assets, like your bank funds, tax refunds, and wages.
IRS Wage Garnishment - An IRS wage garnishment is a type of tax levy in which the IRS will take part of your income in order to settle your existing tax debt. They will do this through your employer and will continue garnishing your wages until your tax debt is paid or other arrangements are made to pay your tax debt.
Pay Less Than You Owe with Offer in Compromise
If you have the resources to pay a partial amount of your IRS tax debt, there’s still hope. You can apply for the IRS government payment plan called an Offer in Compromise (OIC) to resolve the remaining amount. Depending on your financial capacity and upon acceptance, the IRS dratically reduces the total debt that you can pay. This reduced amount can be paid in a lump sum or in fixed monthly payments.
There is a catch with the Offer in Compromise program though. It isn’t always easy to qualify for a settlement offer if you don't know what you are doing. The IRS considers your ability to pay, income, expenses, and asset equity when determining your eligibility for an Offer in Compromise. While it can be a life-changing tax settlement for many people, the IRS doesn’t give an Offer in Compromise easily.
Here are some common reasons for ineligibility:
1. You haven’t filed all required tax returns
2. You haven’t made any required estimated tax payments
3. You’re currently in an open bankruptcy proceeding
4. You own a business with employees and haven’t submitted all required tax deposits
5. You could pay your tax debt in a lump sum or through an installment agreement and/or equity in assets.