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It’s easy to feel overwhelmed when presented with tax relief options. Without proper guidance and advice, making a decision can seem like a difficult and daunting prospect. After all, there’s often a lot on the line – your money, your property, and your financial future might be at stake. That’s not even taking into consideration how confusing the various tax relief options are.
If you’re choosing a tax relief option to get out of tax debt, it’s best to get some advice from an experienced tax lawyer during a free consultation. That way you’re sure that you’re choosing the best option in light of your circumstances. Nevertheless, some of the top tax relief options are detailed below to help you get started on your path to tax resolution.
Offer In Compromise
An offer in compromise is one of the most common tax options available, and it can apply to most taxpayers. The idea behind an offer in compromise is simple. It involves a reduction of the original tax debt in return for prompt payment of the debt. Sometimes a taxpayer may be able to afford only a portion of the debt, but not the entirety of it. (This would be an offer based upon doubt as to collectibility). Prompt payment doesn’t always mean a one-time payment though. The IRS currently allows offers to be paid in installments, depending on its agreement with the taxpayer.
Installment Agreement
An installment agreement (payment plan) is another common tax relief option. It allows you to structure payment of your tax debt for an extended period of time, allowing you some breathing space. So instead of the debt being payable at once, it’s payable in small portions at a time which allows the taxpayer to better repay the arrears. An installment agreement doesn’t erase the debt immediately, unlike other tax relief options, but it does allow the taxpayer some breathing space while they come up with the money. Another added benefit is that some payment plans allow the suspension of interest and penalties. Interests and penalties often add a substantial amount of tax debt, especially if the debt has been outstanding for a long time.
Tax Expiration via Statute of Limitations
There’s an interesting concept in tax law called ‘statute of limitations’. It basically sets a limit on the government’s ability to collect the tax after a certain period of time. There are two important periods when it comes to tax expiration via the statute of limitations as a form of tax relief. The first is the statute of limitations regarding the time to assess, and the second is the statute of limitations regarding the time to collect the assessed tax debt. The general rule is that tax on an income tax return must be assessed within 3 years of the filing of that tax return. Exceptions, however, can be made for fraud or non-filing of returns.
Once a tax debt has been assessed, the IRS then has ten years to collect the tax debt. If for some valid reason, or due to oversight, the IRS doesn’t collect within the allotted ten years then the statute of limitations is deemed to have expired and the tax debt can no longer be collected.
Currently Not Collectible Tax
A ‘currently not collectible’ status is assigned by the IRS to a taxpayer who fits the qualifications. There are two ways in which a taxpayer may qualify for ‘currently not collectible status’:
- When a taxpayer has barely enough to cover living expenses with their wage
- When a taxpayer’s assets are not worth levying.
As a tax relief option, a currently not collectible status isn’t an enviable position to be in. But it can give you some breathing space while you figure out other options.
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