IRS One Time Forgiveness: Does It Apply to You?
Have you heard offers on TV or online promising to eliminate all of your tax debt? Have you wondered if these promises could be real or are they just too good to be true? In reality, while no formal debt forgiveness plan actually exists, you might actually qualify for significant assistance from the Internal Revenue Service (IRS) that can help you get a clean slate where your taxes are concerned. Success Tax Relief is a full-service tax firm that can help determine whether you meet these criteria. Here are some of the instances where taxpayers may be able to get out from under their tax debt for much less than they owe.
Can Your Tax Debt Be Forgiven
1. How old is the tax debt?
If your tax debt is more than 10 years old and the IRS has not made attempts to collect, then the statute of limitations has passed and you will not have to pay your back taxes. That is correct—the IRS has up to 10 years to collect from taxpayers and if they exceed this timeframe, they are not legally allowed to collect.
2. Offer in Compromise
The IRS understands that there are instances in which they will not be able to collect the full amount a taxpayer owes. If you have a low income or are experiencing a significant financial hardship, you may qualify for an offer in compromise, which allows you to settle your tax debt for less than what you actually owe.
This does not preclude you from having to file; you still must file all required tax returns and also fill out the Offer in Compromise application, which will ask for documentation that proves that you are unable to pay the full amount due. The IRS publishes an entire booklet on the process, which we can help you better understand at Success Tax Relief. If your application is rejected for any reason there is an appeals process. A positive: an Offer in Compromise does not affect your credit history or score, so it is an avenue worth pursuing if you qualify. The recent IRS Fresh Start Initiative has made the application process easier for struggling taxpayers.
3. Non-collectible status
This is another program for those who cannot afford to pay their tax debt. If the IRS agrees that you cannot pay your living expenses and your tax debt, it could place your account in non-collectible status (CNC), meaning you will not receive letters and they will not place levies on your property or income for a given period of time. Note that the IRS does not suspend penalties and interest charged on the amount you owe.
Also, the next time you send in your tax form, it can keep any returns due to you and discount that amount from that which you owe.
Note that although it’s unlikely, the IRS can choose to file a Notice of Federal Tax Lien (NFTL) even if your account is in CNC status. This NFTL can affect your credit rating.
If you have filed Chapter 7 bankruptcy, then the IRS is also not allowed to pursue collection. Bankruptcies negatively affect your credit.
5. Other IRS Fresh Start Programs
As previously mentioned, the IRS recently launched the Fresh Start Program, which can benefit many taxpayers, especially ones struggling to find stable employment or your small business has experienced a sizable reduction in income. The Fresh Start Program helps taxpayers by:
- allowing taxpayers to pay their debt over time rather than in one large lump sum
- removing the burden of additional IRS penalties
- removing a tax lien from your record – if the IRS chooses to do so
To clarify: if you qualify for an installment agreement, you are still responsible for the full amount owed, but you make monthly payments on your debt over the course of several years, depending on your agreement. As long as you are paying your taxes on time, it is unlikely the IRS will file a tax lien and a Fresh Start installment agreement will not only not affect your credit, but as mentioned above can even remove a tax lien.
Get Out From Under Tax Debt
Success Tax Relief understands that feeling the burden of tax debt can be overwhelming and stressful. Our team works with taxpayers all over the country to find the best path forward, minimizing the impact on your overall financial future. For more information about our team, our services, or to see if you might qualify for a program that helps you get out from under tax debt once and for all, contact us online for a free consultation.