There are dozens of reasons why you may find yourself owing the IRS. If you’ve filed your taxes and owe money, or if the letters from the IRS have already begun to come, you may be wondering about tax debt forgiveness. Is it true that, in some cases, the IRS could relieve you of some (or all) of your taxes owed?
Many Americans find themselves in a situation similar to yours, and are looking for options. Here’s what you need to know about tax debt forgiveness, how it works, and how to get back on track with the IRS.
Tax Debt Forgiveness: What You Need to Know
The first, most important thing you need to know about tax debt forgiveness is that it’s extremely unlikely that the IRS will forgive all of your tax debt. Many taxpayers hear the phrase “tax debt forgiveness” and think that the government will wipe the slate clean.
That’s just not so. Instead, tax debt forgiveness usually comes in the form of one or more programs that can help you pay down your debt. For instance, you may qualify to make very low monthly payments until your debt is paid. Or, the IRS may work with you to settle for a lower total debt than you actually owe.
In almost no cases at all will the IRS completely wipe your tax account free of debt. That said, it’s extremely important that you don’t give your personal information to anyone who calls your phone telling you otherwise.
Tax Debt: What You Need to Know
You may have heard horror stories about people who have owed money to the IRS. You may hear rumors that you could end up in jail, or that your wages or bank account could be garnished.
Rest assured: unless you’ve cheated on your taxes, you’re probably not going to go to jail simply for owing the IRS money. The IRS will, however, garnish your paycheck, freeze your bank accounts and take other actions to ensure they get what they’re owed.
If you owe money to the IRS, you probably already know about it. But let’s imagine that you simply forgot to submit your tax returns one year. The IRS won’t just garnish your paycheck. Instead, they’ll send a letter to the address they have on file. They may even send a letter to your employer, warning of an impending garnishment.
To make a long story short, you’ll have some time to prepare before any of the serious consequences happen. It’s critical that when you receive that very first letter, you call the IRS to find out what tax debt forgiveness programs may be available to you.
Tax Debt Relief Scams
If you owe money to the IRS, you won’t receive a phone call. You won’t receive an email, either. The only way the IRS will communicate with you is via letter.
If you receive a phone call from the IRS asking for your bank account information to settle a tax debt, hang up the phone immediately! Trust us, the IRS already has your bank account information, and they don’t need to call you to get it.
If you do owe money and want to settle, you should still hang up the phone. Then, call the IRS back on their toll free number at 1-800-829-1040. It’s only by using this number or the number to your local tax office that you should give up any personal information including your address, social security number or banking information.
Recently, scammers have begun to call citizens offering tax debt forgiveness and tax relief programs. These people will take your bank account information and wipe your account clean. It can’t be stressed enough: don’t click links in emails which claim to be from the IRS, and if you receive a call from the IRS, hang up and call back on the official line.
IRS Tax Debt Forgiveness
Now that you’re aware of how the IRS will contact you and potentially penalize you, and you’re aware of the scams that exist, you want to know about tax debt forgiveness programs.
IRS tax debt forgiveness takes a few forms. And, as mentioned, not all of these forms will offer you a clean slate. When you call the IRS, your representative can talk you through a few of the following tax debt forgiveness programs that may be available to you.
Currently Not Collectible
The cool thing about tax debt is that the IRS can’t collect what you can’t pay. If it’s determined that paying your tax debt will cause you extreme financial hardship, you may be eligible for the CNC program. The CNC program is temporary, and will be reevaluated after around a year. But in the meantime, you can qualify for the Currently Not Collectible program if your income is too low to make tax payments.
Offer in Compromise
The Offer in Compromise program is another tax debt forgiveness option. There are unique challenges to the Offer in Compromise option, but what the program entails is reaching a settlement amount for your debt.
You’ll need to provide the IRS with detailed financial information if you choose this option, so be sure you’ve got all your paperwork ready when you apply for the program. If you’re approved, your tax debt could be settled for pennies on the dollar.
There’s a reason people call it “divorced credit.” In some cases, you may owe taxes because you were married, filing jointly with a spouse who was less than great with finances. For instance, if your wife worked full time while you stayed home with the kids, you may not be responsible for your tax debt.
If this is the case, tell the IRS. It’s possible that you won’t owe the IRS money, or that the liability for non-payment falls on your spouse or ex-spouse. As with Offer in Compromise, you’ll need to furnish proof that you’re not responsible for the debt. And while it won’t wipe your slate clean, Innocent Spouse status can prevent garnishments and other negative setbacks that accompany tax debt.
Tax Debt Forgiveness
Despite what you may have heard, it’s almost impossible to have your tax debt wiped completely clear. However, the IRS wants to recover at least a portion of what it’s owed. In most cases, if you’ve filed your taxes honestly, the government will work with you amicably to find a solution which works for all parties.