The United States tax system is known to be complex and can be challenging to navigate. As a result, many people owe back taxes to the IRS. If you find yourself in this place, you may wonder how to eliminate your back taxes.
Fortunately, there are a few options available to protect you. One method is to apply for tax debt relief.
What Is Tax Relief?
Tax relief is a reduction in the amount of taxes you owe. It may be available to individuals, businesses, and other entities. There are several types of tax relief, including:
Tax credits: These reduce the amount of taxes you owe dollar-for-dollar.
Tax deductions: These reduce the amount of income subject to taxation.
Tax exemptions: These certain exempt types of income from taxation.
Tax relief is specific exemplary, or permanent. It can also be a one-time payment or an ongoing reduction in your tax liability.
The federal government, as well as state and local governments, may offer tax debt relief. Typically, tax relief is provided in response to a natural disaster, economic downturn, or other extraordinary circumstance.
How Does Tax Relief Work?
The IRS offers several relief options for taxpayers who owe back taxes. Here are three you should examine if you owe back taxes.
1. Installment Agreement
An installment agreement allows you to pay back taxes over time in monthly or quarterly payments. To qualify, you must be adequate to pay your current tax liability plus any penalties and interest that accrue. The IRS will also consider your ability to pay, income, and expenses when determining if you qualify for an installment arrangement.
2. Offer in Compromise
An offer in compromise grants you to settle your tax debt for less than the total amount you owe. To qualify, you must demonstrate that you cannot pay your total tax liability and that paying the reduced amount would be “in the government’s best interest.” The IRS will recognize your ability to pay, your income, your expenses, and your asset equity when income, expenses, and compromise.
3. Currently Not Collectible Status
Currently Not Collectible Status temporarily suspends collection action by the IRS. To qualify, you must demonstrate that you cannot pay your tax liability and that collection action would create a financial hardship. The IRS will acknowledge your ability to pay, income, expenses, and asset equity when determining if you qualify for currently not collectible status.
If you owe back taxes, you should consider all of your relief options before taking any action. The IRS offers several relief options, and you may qualify for more than one. Be sure to analyze your opportunities before carrying out a decision, and consult tax professionals if you have any questions.
Tax relief can work to eliminate back taxes in several ways quickly. Taxpayers can file for an extension, giving them more time to pay their taxes. They can file for a payment plan, allowing them to make smaller payments over time. Finally, taxpayers can file for an offer in compromise, allowing them to settle their tax debt for less than the total amount owed.
If you’re facing IRS tax problems, it’s vital to seek professional help to find a resolution. The tax professionals at Axiom Tax Resolution Group are experienced in finding solutions that work for the taxpayer and the IRS. Contact us today to get started on dealing with your tax problems in Birmingham, Al.