Not all taxpayers are seized by property liens or left wringing their hands helplessly in the face of their IRS issues; many navigate their way out of their tax debt problem through programs like an Offer in Compromise (OIC). Such programs, run by tax professionals, can divide your tax debt into manageable payments or even lower the total amount you owe. However, consider that applying for an OIC won’t necessarily bring IRS collection actions—like tax liens—to a screeching halt. President Biden's proposed Made in America Tax Plan, focusing on corporate tax fairness, aims to bolster resources for back tax relief and ensure optimal government funding.

In cases of failure to file, pay, or deposit, the IRS provides a stern notice and the helping hand of reasonable cause assistance. You might have heard tax relief companies advertise these services on TV, radio, or online, promising tax debt assistance. With their arsenal of proven strategies, tax professionals can assist taxpayers through tax audits, trim down tax debt, and halt wage garnishments and bank levies. Remember that a tax relief company might make your debt lighter, but it won’t make it disappear.

Consider tax resolution services as a valuable navigational tool, guiding you through the labyrinth of tax debt and ensuring U.S. GAAP and SEC compliance. A clear understanding of these services and the proper use of resources available to taxpayers can help chart a course out of tax debt and ensure Uncle Sam gets his due.

A tax resolution advocate—think of them as your personal tax debt assistance coach—can navigate through the confusing maze of IRS rules and norms applying various payment plans, which is especially helpful to taxpayers in hot water with the IRS. They can represent you before the IRS, help with debt problems, defend taxpayer rights, assist with unfiled income tax returns, and provide solutions to common tax-related issues.

What is a tax resolution advocate?

Regarding dispute resolution, you don’t always have to opt for a court showdown. The Treasury can provide tax help through Alternative Dispute Resolution (ADR), a mechanism that holds out the possibility of tax debt reduction without landing you in court, which is especially beneficial for those looking at significant tax bills and penalties.

What is the tax dispute resolution process?

Whether going local or contacting your state or federal department, tax disputes can be resolved at different levels, involving representatives from both sides. Participation in this process comes with a user fee, currently pegged at $181,500, and every distinct issue attracts its own user fee.

Though a lump sum might seem daunting, the IRS offers a viable alternative via the Independent Office of Appeals. Setting out to resolve IRS tax controversies, it forges a path to resolution without litigation, ensuring fairness to both the government and the taxpayer. This process can result in a negotiable payment plan, where a structured schedule of payments can lighten the burden of your tax bill.

Under certain circumstances, like genuine financial hardship or when the taxpayer can pay off the reduced debt, the IRS might even forgive your tax debt. But don't mistake this for a clean getaway—the IRS may have a ten-year window to recover unpaid tax debt before it decides to write it off.

Does the IRS forgive tax debts?

A tax resolution enrolled agent is not just anyone off the street; this person is certified to represent taxpayers before the IRS. They have stepped up to the plate by finishing specialized training and passing a three-part IRS examination. The U.S. government has authorized only these enrolled agents to directly represent taxpayers and handle all kinds of tax matters, from negotiating payment plans to suggesting other options.

What is a tax resolution enrolled agent?

An expert who has received permission from the Internal Revenue Service (IRS) to represent taxpayers in resolving their tax problems is a tax resolution enrolled agent. These agents have proven their expertise in tax matters by passing a problematic IRS examination.

Enrolled agents provide tax resolution services, which involve helping taxpayers navigate complex tax problems such as unpaid taxes, tax audits, penalties, and other issues. They can represent taxpayers during IRS interactions, negotiate on their behalf, and provide guidance on tax-related matters.

Enrolled agents know tax laws and regulations and stay up-to-date with any changes or updates. They can provide valuable advice and strategies to help taxpayers effectively resolve their tax problems and minimize potential financial consequences. Overall, a tax resolution enrolled agent plays a crucial role in assisting taxpayers in resolving their tax issues and ensuring compliance with tax laws.

What are the top tax reduction strategies to reduce IRS debt?

If you have an IRS tax debt and cannot pay the full amount, options are available to help you settle for less than you owe. Here are some steps you can take:

1. Your financial situation: Take a close look at your income, expenses, and assets to determine your ability to pay. This will help you understand your negotiating position and your options.

2. Consult a tax professional: It's recommended to seek the guidance of a tax professional, such as a certified public accountant (CPA) or a tax attorney. They can provide personalized advice based on your situation and navigate the complexities of IRS processes.

3. Offer in Compromise (OIC): An offer in compromise is an agreement between you and the IRS that settles your tax debt for less than the full amount owed. To qualify for an OIC, you must demonstrate that you can't pay the full amount within a reasonable time frame or that paying it would cause financial hardship. The IRS will consider your income, expenses, asset equity, and future earning potential. Consult with a tax professional to determine your eligibility and assist you with the application process. 

4. Installment Agreement: You can negotiate a monthly payment plan with the IRS through an installment agreement. This allows you to pay off your debt in smaller, more manageable increments over time. While this won't reduce the overall amount you owe, it provides a structured payment plan based on your financial situation.

5. Currently Not Collectible (CNC) status: If you're experiencing extreme financial hardship and are unable to pay your tax debt, you may qualify for Currently Not Collectible status. This temporarily suspends IRS collection activities until your financial situation improves. However, keep in mind that penalties and interest will continue to accrue during this time.

6. Seek professional negotiation: If your tax debt is substantial, you can consider hiring a tax attorney or a tax resolution firm that specializes in negotiating with the IRS on behalf of taxpayers. These professionals can use their expertise to help you navigate the process and potentially settle your debt for less.

7. Penalty Abatement: In some cases, taxpayers may qualify for penalty abatement, which reduces or eliminates the penalties associated with unpaid taxes. This can help reduce the overall amount owed.

8. Innocent Spouse Relief: This type of relief is available for taxpayers who have joint tax liabilities with their spouse but believe they should not be held responsible for the tax debt. Innocent Spouse Relief provides relief from joint tax liability under certain circumstances.

9. Bankruptcy: In certain situations, filing for bankruptcy may help discharge or reduce tax debt. However, the rules regarding tax debt and bankruptcy can be complex, and it's essential to consult with a bankruptcy attorney to understand the implications.

10. Statute of Limitations: The IRS has a limited time to collect unpaid tax debt. The statute of limitations for tax debt collection is typically ten years from the tax assessment date. Once this time period expires, the IRS can no longer legally collect the debt.

11. Taxpayer Assistance Order (TAO): Taxpayer Assistance Order is a mechanism to seek relief when a taxpayer is experiencing significant hardship due to IRS actions. It can provide temporary tax debt relief and help resolve disputes with the IRS.

These are just some examples of debt-reduction options. It's important to note that the eligibility and effectiveness of these options may vary depending on individual circumstances. It's advisable to consult with a qualified tax professional or seek legal advice to determine the best course of action for your specific situation.

How to find the best tax relief companies

While I cannot provide real-time information or endorse specific companies, I can offer guidance on identifying reputable tax relief companies in the US. When searching for tax relief assistance, it's essential to consider the following factors:

1. Research and Reviews: Conduct thorough research and read reviews about different tax relief companies. Find reliable sources, such as independent review websites, consumer advocacy organizations, and the Better Business Bureau (BBB) to gather information about the company's reputation and customer experiences.

2. Accreditation and Certifications: Verify the tax relief company's accreditation and certifications by contacting respectable organizations like the National Association of Tax Professionals (NATP) or the American Institute of Certified Public Accountants (AICPA). These accreditations provide evidence that the organization complies with various standardized professional requirements.

3. Experience and Expertise: Consider the company's experience in handling tax relief cases. Look for firms that have been in operation for a significant period and have expertise in dealing with your tax issues.

4. Free Consultations: Many reputable tax relief companies offer free consultations to assess your situation and provide initial guidance. Take advantage of these consultations to understand the company's approach, professionalism, and understanding of your tax issues.

5. Transparent Pricing: Inquire about the company's fee structure and ensure they provide clear and transparent information about their pricing. Be cautious of companies that make unrealistic promises or charge excessive upfront fees.

6. Licensed Professionals: Verify that the tax relief company employs licensed professionals, such as enrolled agents, certified public accountants (CPAs), or tax attorneys, who can provide knowledgeable assistance and represent you before the IRS.

7. Client Support and Communication: Consider the level of client support and communication the company offers. A reputable tax relief company should be responsive to your inquiries, provide regular updates on your case, and keep you informed throughout the process.

8. Avoid False Promises: Beware of companies that guarantee specific outcomes or promise to eliminate your tax debt entirely. Resolving tax issues is complex, and ethical tax relief companies will provide realistic expectations based on your specific circumstances.

It's always advisable to consult with a tax professional or seek legal advice before engaging with a tax relief company. They can provide personalized guidance based on your unique situation and help you make an informed decision.

Remember, the best tax relief company for you may depend on your specific needs and the complexity of your tax situation. Take the time to research and compare multiple companies to find one that aligns with your requirements and has a track record of providing reliable and ethical tax relief services.

Tax debt forgiveness covid-19

During the COVID-19 pandemic, the Internal Revenue Service (IRS) implemented relief measures to assist taxpayers facing financial hardships. These measures included deadline extensions for filing and paying taxes and various stimulus payments and economic impact payments.

It's important to note that tax debt forgiveness is typically granted under specific circumstances, such as through an Offer in Compromise (OIC) or in cases of extreme financial hardship. These forgiveness programs are not directly related to COVID-19 but are available under normal tax resolution procedures.

To get the most up-to-date and accurate information regarding tax debt forgiveness or any COVID-19-related relief measures, I recommend visiting the official IRS website (www.irs.gov) or consulting with a qualified tax professional. They will be able to provide you with the latest information and guidance based on your specific circumstances.

If the IRS reduces my tax debt, will that be considered income on my taxes?

When the IRS reduces your tax debt, it generally does not result in additional income that needs to be reported on your taxes. The IRS considers forgiven or canceled debts as taxable income in most cases, but there are exceptions for certain types of debt, including qualified principal residence indebtedness and insolvency.

However, if you receive Form 1099-C (Cancellation of Debt) from the IRS or a creditor showing the forgiven amount, it's important to review it carefully. The forgiven amount may be reported as income unless you qualify for an exclusion or exception.

To determine whether the forgiven debt is taxable, you may need to complete Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness) and include it with your tax return. This form allows you to claim specific exclusions or exceptions to avoid paying taxes on the canceled debt.

Also, read the taxable and non-taxable tables of income.  IRS Publication 525 - Taxable and Nontaxable Income: This publication explains what types of income are taxable and nontaxable. It specifically mentions that tax refunds and credits are not considered income. You can find it at: https://www.irs.gov/publications/p525

It's advisable to consult with a qualified tax professional who can provide personalized guidance based on your specific situation. They can help you understand the tax implications of any debt forgiveness and ensure you handle it correctly on your tax return. Please note that tax laws and regulations can change over time. It's always a good idea to stay updated on the latest information from the IRS or consult with a tax professional for the most accurate and current guidance.

Tax debt statistics

  • In the United States, the total unpaid taxes owed to the IRS were estimated to be $385 billion in 2018.

  • According to the IRS, individuals' average unpaid taxes are approximately $7,000.

  • Over 10 million taxpayers are in IRS payment plans to pay off their tax debt.

  • The IRS has the ability to reduce or even forgive tax debt in some instances.

  • In 2018, the IRS settled over $11 billion in tax debt through its Offer in Compromise program.

  • The IRS accepts more than 70% of taxpayers who apply for an Offer in Compromise.

  • The IRS has the ability to reduce or eliminate interest and penalties associated with unpaid taxes.