The IRS can add significant fees to delinquent back taxes. Still, the IRS will sometimes agree to accept a smaller payment for immediate extinction of your debt. Fortunately, they also offer a few tax forgiveness solutions made specifically to help you if you have trouble paying taxes.
This article will cover tax forgiveness, who qualifies, and the differences between tax allowances, exemptions, and forgiveness. It will also explain the different eligibility requirements that the IRS documents.
How Are Back Taxes Forgiven?
Tax forgiveness is not designed to help avoid paying what you owe the government. Instead, it is meant to alleviate payment of your outstanding tax debt. You can still be expected to pay your total tax debt amount.
But, you might be eligible to have the IRS settle for a smaller amount. This means that the IRS will accept your offer to pay a smaller amount of what you owe.
The IRS has three different ways to forgive your back taxes:
- Tax Allowances
- Tax Exemptions
- Tax Forgiveness
Tax allowances are a specific dollar amount that the IRS will deduct from your gross income. For example, you can remove the interest you pay on your home mortgage. Or you may be able to deduct contributions you make to your IRA. The IRS has a lengthy list of tax allowances. You should consult your tax professional before claiming a tax allowance.
Tax exemptions are amounts that you can subtract from your income. You may qualify to be exempt from paying certain types of taxes. Some examples of tax exemptions are:
- Child and dependent care expenses
- Disabilities incurred during service to the country
- Tuition and fees
- Medical and dental expenses
- Charitable donations
Tax forgiveness is the process where the IRS agrees to accept a reduced amount of your tax debt. There are two different types of tax forgiveness; full tax forgiveness and partial tax forgiveness.
Who Is Eligible for Tax Forgiveness?
To qualify for tax forgiveness, you must be experiencing great financial difficulty. The IRS will be looking for evidence to substantiate your claim. For example, if you have filed for bankruptcy, you should be able to prove you have little to no income. Or, if you have been unemployed, you should have proof of your unemployment.
Again, it is not sufficient to simply tell the IRS you have no income. Your inability to pay your taxes is best backed up with proof. Also, your tax forgiveness will be specific to you. The IRS won’t forgive taxes for an entire family.
However, if you are owed an amount of back taxes that you don’t have the resources to pay, you can apply for tax forgiveness as a family. You will need to provide your tax professional with proof of your inability to pay.
How Do I Apply for Tax Forgiveness?
If you are in severe financial trouble and would like the IRS to accept a lesser amount of payment, then you should consider asking for tax forgiveness. You can file for tax forgiveness by completing Form 982, along with a financial statement mailed to the IRS.
The financial statement should detail your ability to pay your tax debt. It can also include other supporting documentation such as bankruptcy petitions and tax returns.
The IRS can be a daunting bureaucracy to face. However, it does offer a few options for tax forgiveness. You can discuss your situation with a tax professional who will help you understand your options.
Axiom Tax Resolution Group is a team of tax resolution services specialists. Ignoring IRS tax problems can be a costly mistake. The trusted tax professionals at Axiom Tax Resolution Group are ready to find a permanent solution to your tax problems with the IRS. If you need assistance filing for tax debt forgiveness with the IRS, we’ve got you covered. Get in touch with us today and let us know how we can help.