There are several reasons why you could fall behind on your tax debt. Perhaps you have unwittingly miscalculated your financial obligations to the IRS or are under financial stress and you don’t have any ability to pay. However, those are not reasonable excuses to neglect reaching out to an IRS representative. In this article, we’ll discuss the options available to you regarding the IRS’s one time forgiveness policy.
You must be aware of the different IRS tax relief policies at your disposal. Know that while the IRS mandate is to collect taxes, they’re just as open to working with taxpayers on how best to cater to any outstanding debt.
1. IRS tax relief options
There are three types of tax relief options you can apply for:
- Reasonable cause. The most common causes recognized by this tax relief clause include Acts of God or health-related circumstances. For instance, if a recent calamity such as a destructive cyclone has hindered you from paying your tax obligations, you might qualify. The same goes if you were diagnosed with a life-threatening illness resulting in hefty hospital bills that limited your capacity to pay the tax debt.
- Administrative waiver and first-time penalty abatement. This policy provides tax leeway to those faced with an unprecedented tax situation that has limited their capacity to pay. For example, if you received an inheritance attached to a clause that specifies how to spend the money, it might be difficult to pay up your tax obligation on the said inheritance. That is considering how the money won’t go to your bank account. With sufficient documentation, the IRS may recognize this “unprecedented” and tricky tax circumstance and decide in your favor.
- Statutory exception. This is given to taxpayers who received erroneous information from an IRS representative and incurred a tax penalty as a result. Here, the advice you received should be specifically and directly linked to your received penalty notice.
2. IRS One Time forgiveness and tax relief eligibility factors
The IRS one time forgiveness and relief programs offered by the IRS include the following:
- Installment agreement (IA) – The most common repayment period is 72 months. This is recommended if you can’t pay your tax debt, including penalties and interest, in full.
- Innocent spouse relief – If your wife or husband committed tax fraud, you could apply for this relief program if you know nothing about the matter.
- Offer in compromise (OIC) – Here, you offer to pay the IRS only a fraction of what you owe.
- Currently not collectible (CNC) – This will give you a one- to two-year delay in any collection activity on your tax liability if you can prove that you are currently unable to pay either your debt, whether in an installment agreement or full.
3. Request for temporary delay of the collection process
If, for a reasonable reason, you are unable to pay your outstanding tax debt, you may contact the IRS to request a temporary delay of the collection process. The IRS will look into your account and ask you to complete a Collection Information Statement. You may fill out these forms:
You will also receive a request to prove your financial status. Ideally, it will include your monthly income and expenses, as well as your assets. If the IRS decides that your request is valid and you do not currently have an ability to pay, the IRS will grant you “Currently Not Collectible” status.
4. Tax relief for those affected by COVID‑19
In November 2020, the IRS released new statutes regarding their collection procedure which aims to alleviate the financial burden caused by the pandemic to taxpayers. Some noteworthy clauses include the following:
- The short-term payment plan is extended to 180 days from 120 days.
- The IRS will be flexible in collecting payments under the terms of an Offer in Compromise.
- Those who owe less than $250,000 in taxes may apply for an installment agreement without the need for a financial statement, so long as their proposed monthly payment is sufficient.
The IRS forgives
It’s impossible for you to sweep your tax debt under the rug because the IRS will go after you. That’s their legal jurisdiction and they are the world’s most powerful and largest collection agency, after all. However, do know that the IRS does not exist to push you up against the wall finance-wise. They are willing to work with you in figuring out which tax relief option is the most convenient to your situation.
It’s best to partner with a tax resolution services provider in this regard—let Tax Samaritan be your ally. We have been in the business since 1997, so you can rest assured we know what we are doing. We can help you be forgiven—by the IRS, that is.