Tax laws can be quite complicated on their own, as the system is built for several purposes. These include raising revenue, funding government projects, and using it to pay specific groups and industries for their services. Today, several people agree that some tax policies are already complicated enough as it is. However, the real problem lies with those that have yet to learn the basics of handling their taxes.
As a citizen, one of the most basic factors to comprehend is how to verify your documents and claims. This is known as tax compliance, which is particularly important for those with higher than average income. It is also significant to those who have more than one source of regular financial income.
Once you provide the necessary information that validates your tax claims, the IRS examines these documents to ensure everything is in order and that you are legally following regulations.
In theory, the process is simple and straightforward so long as you follow the applicable laws and regulations at the time. However, many people often encounter problems or certain issues that require tax relief or tax resolution.
These two solutions are often the only way to resolve complex issues when filing for your taxes, but they have major differences between them.
The key differences between opting for tax relief vs. tax resolution can be determined by looking at the components of each. These factors include their primary purpose, the payment plans, what they offer as a compromise, and the financial collectibles you could get from them.
To avoid further confusion for taxpayers in the future, this guide will help you better understand how to differentiate the two and help you in your decision-making process.
The purpose of tax relief mainly indicates the remission of a part of your income tax typically taken from earned income. In simpler terms, you pay fewer taxes to account for business expenses when self-employed. In other cases, some tax is returned to you in another way, such as personal pension payments.
Opting for this option allows you to have fewer tax burdens when you are experiencing delays in receiving your regular income.
Tax resolution services primarily help taxpayers resolve back tax issues when they fail to settle their unpaid taxes after some time. Most people opt for this solution when the IRS indicates repetitive problems with their tax status. Hiring a tax resolution specialist is often a costly process, but it can help you eliminate existing tax debts and put a stop to back-tax collection.
2. Payment plans
With tax relief, you can ask the IRS for a possible payment plan if you cannot find the means of settling your tax debts all at once. This can be in the form of short-term or long-term payment plans, depending on the maximum amount you legally owe. Additionally, this can be settled through online installments for a small processing fee per payment or transaction made.
Tax resolution, meanwhile, offers several different payment options to choose from, provided that you also pay the necessary fees for their services. Debt resolutions include Currently Not Collectible status (CNC), Streamlined Installment Agreement (SLIA), and Full Payment Installment Agreement (FPIA).
3. Offers in compromise (OIC)
This type of tax relief is an agreement that you make between yourself and the IRS to help you settle your tax debt. Settlements can be made for a significantly low price, depending on your finances and current debt situation. This method requires a single payment that is agreed upon by both parties. However, despite its appeal, many people find it difficult to qualify for this option.
Through a tax resolution specialist, there may be additional paperwork and requirements when filing for an OIC. In most cases, it can take 1-2 years for your request to be processed and approved due to the number of applications that the IRS typically receives.
In the event that your application is approved, you must remain compliant with your tax filing and payment requirements to avoid further issues or the revocation of the Offer in Compromise.
4. Collectible finances
Collectibles are identified as alternative investments made by the IRS, such as art pieces, coins, rare items, antiques, etc. If these items are sold or auctioned off, you can gain long-term capital tax at a specified rate when supposed or after more than a year of ownership.
Choosing the Right Option
Filing taxes can be a confusing and frustrating time for those unaware of how to handle the process. In most cases, people do not often settle these correctly until the IRS reaches out to them about their unsettled payments. Luckily, partnering with Tax Samaritan offers you the best-in-class service when it comes to tax resolution.