Is There Really a Tax Debt Relief Program?

Tax debt relief is a major concern for many Americans. Millions of people owe the IRS money, totaling billions of dollars. Tax resolution service providers aim to assist those with tax debt to apply for IRS programs to get out of debt. One common phrase that pops up again and again in these company’s advertisements is “IRS tax debt relief program.”

But the truth is, the IRS does not have an official program that forgives tax debt. This phrase is only used by these tax resolution companies to market their services. It doesn’t always mean they’re not legitimate service providers, but it’s helpful to understand what these marketing terms mean and what the IRS actually offers as far as tax relief options. 

To put it simply, there is not any one IRS program called the Tax Debt Relief Program, but there are many different IRS programs designed to help people get relief from their tax problems. Keep reading to learn more, or contact us at Damien’s Law today for help.

What Is Tax Resolution?

Tax resolution is concerned with helping taxpayers take care of any tax issue they’re facing, including tax penalties, tax return errors, tax debt, tax fraud, tax audits, tax appeals, or legal trouble. Many tax resolution companies were created to support taxpayers with these common problems or take advantage of new tax credits and deductions.

While tax resolution on its own is not a scam or fraudulent, many companies use misleading language in this arena, especially about tax debt. To help you distinguish between legitimate tax pros and subpar tax resolution companies, we cover common warning signs below. 

Is the Tax Debt Relief Program a Scam?

Tax resolution organizations may make claims that they can help you navigate IRS tax debt relief programs. They may advertise that you could get your tax debt forgiven or reduced. They may also claim that there’s a completely new tax debt relief program that you have to take advantage of right away or else you’ll miss your chance.

You may get tax debt relief program calls where the company claims it will give you access to the best IRS tax debt relief program out there. 

Sure, these promises all sound great. But the truth is, this is all marketing speak to get your business and keep you from researching and applying for relief on your own. Once you start working with these companies, you’ll find out that complete tax debt forgiveness is unlikely.

What Is a Tax Debt Relief Program?

Tax resolution companies may say that they can help you eliminate or reduce your tax debt, and again, they’ll often refer to the IRS Tax Debt Relief Program. However, as noted above, there isn’t a specific tax debt relief program. Here are some of the other tax relief marketing phrases used by these companies and an explanation of what they really mean:

• IRS hardship: The IRS’s currently not collectible status allows you to defer your tax liability if you can show you have a financial hardship. However, it does not eliminate your debt. You will still have to pay it when your financial status improves. If you prove that you’re experiencing financial hardship, you can also get relief from certain collection actions such as wage garnishment. 
• IRS one-time forgiveness: The IRS does not offer a one-time tax debt relief program. However, this phrase usually refers to first-time penalty abatement offered by the IRS. This abatement only applies to tax penalties the IRS issues to you, not your tax debt.
• IRS Fresh Start program: This is not an IRS program you can apply for to get relief. This term was used back in 2011 when the IRS made changes that made it easier to qualify for offers in compromise and other relief programs.
• Zero tax plan/zero tax debt relief program: These phrases make consumers believe they can reduce their tax bill to zero. This is not the case. Zero tax language has been recently associated with scams, where fraudsters are trying to get your information. Don’t respond to any type of communication that uses this language.
• IRS writes off millions a year: This is another common phrase you may hear that aims to trick you into thinking the IRS could simply write off your tax debt. Unfortunately, this phrase is misleading. While the IRS does allow some taxpayers to settle for less than they owe, taxpayers must meet strict application criteria to qualify. 

The bottom line: these terms don’t refer to some new program that you can qualify for to get your tax debt forgiven. Also, beware of any language that states that time is running out since these are actually ongoing programs. Watch for these misleading phrases when you’re seeking tax debt assistance. Many companies don’t use the actual names of the IRS options to prevent you from looking them up yourself.

A Note about the IRS Statute of Limitations

One important note is that there is a statute of limitations for the IRS. The agency has 10 years from when it assessed you to collect the tax owed. If the tax debt reaches something called the Collection Statute Expiration Date (CSED), the IRS can no longer collect.

Many taxpayers mistakenly think they can just wait out the IRS and get their debt waived. This isn’t the case. The IRS will take significant steps to reclaim what’s owed from you, including issuing a lien on your property, seizing the property, or taking your wages or savings. Waiting out the statute of limitations is never worth undergoing these steps from the IRS, which can lead to a much bigger financial liability and even legal trouble.

IRS Tax Debt Relief Options

So, what does the IRS actually offer as far as tax debt relief? They don’t have fancy names like you’ll see in marketing language. 

The agency offers several different options depending on your financial situation, income, tax history, filing status, and other factors. Here are the choices you have—minus the misleading advertising jargon—when you’re having trouble paying what you owe the IRS:

Installment Agreements

You may read about payment plans or installment agreements from the IRS, which mean the same thing. When you’re unable to pay your tax bill in full by the deadline, this may be the right option. You will contact the IRS to apply for an installment agreement, and you will agree to pay a set monthly amount over a set time frame. 

There are both short-term and long-term installment agreements. A short-term plan is where you’ll pay within 180 days, and a long-term plan is a longer monthly payment arrangement that typically lasts three to six years but can be longer in some cases. For long-term agreements, you have to pay a $31 setup fee if you pay with automatic withdrawals, or $130 if you pay via non-direct debit. You can get a waiver if your income is below a certain level.

Partial Payment Agreements

Another type of payment plan is called a partial payment installment agreement (PPIA). A PPIA can work in situations where you cannot afford the minimum payment on an installment agreement. With this option, you pay the most you can afford every month until the CSED, and then, the IRS waives the remaining balance. 

Penalty Abatement and First-Time Abatement

As briefly mentioned above, the IRS may waive penalties under a type of administrative waiver. The most common is the first-time penalty abatement option (or first-time abate), which allows you to get certain tax penalties waived if you have a history of tax compliance. Eligible penalties for first-time abatement include:

• Failure to file
• Failure to pay
• Failure to deposit

The IRS states that they’ll consider any penalty amount for abatement. You must have a solid tax compliance history, meaning you’ve filed the same type of return over the last three years and you didn’t get any penalties for those years.

First-time penalty abatement is not tax forgiveness. You still owe your complete tax liability under this option. If you’re granted abatement, only the penalties incurred will be waived, not your debt. You can also request penalty abatement for “reasonable cause,” which refers to situations where you missed a deadline due to death, illness, disaster, or other very serious reasons.

Offer in Compromise

Another common relief option is called an offer in compromise. With this option, you could actually get your tax bill reduced and still settle it with the IRS. Every case is different, but the IRS evaluates whether you have a financial hardship, considering your ability to pay, your income and expenses, and your equity.

You will send an offer to the IRS that represents what you can afford to pay, along with any proof of financial hardship. You also must have:

• Filed your tax returns and made estimated tax payments.
• Aren’t declaring bankruptcy.
• A valid tax extension if applicable.
• Made any necessary tax deposits as an employer for the current and last two quarters.

This option is a good choice if you are facing a significant hardship and cannot afford to pay off your tax bill, even under a payment agreement. However, you will have to share very detailed information about your finances with the IRS. Then, you’ll need to pay the offer in a lump sum or over 24 monthly payments. 

Currently Not Collectible Status

If an offer in compromise isn’t feasible for your situation, meaning there’s no offer you can afford to send, the next step would likely be currently not collectible (CNC) status. The IRS refers to this as temporarily delaying the collection process. 

CNC may be realistic when you cannot afford to pay your tax bill because of a temporary situation. If you qualify, the IRS will stop the collections process. When your situation improves, the IRS will once again make attempts to collect what you owe.

Remember: even with CNC status, your tax bill isn’t forgiven. You are simply deferring payment with a temporary collection delay.

Innocent Spousal Relief

You may be able to lower your tax bill if your spouse, whom you file jointly with, understated what you owe on your joint return. You cannot have known about these errors. The IRS states that innocent spousal relief only applies to liability on your spouse’s income, so you can’t get relief for your income or other components on your tax return.

Tax Extensions

One common misconception from taxpayers is that you shouldn’t file your tax return if you’re unable to pay what you owe. This isn’t the case. The IRS states that you need to file your tax return or request an extension by the deadline, even if you can’t afford your full tax bill. 

Filing your return or requesting an extension by the April tax deadline can thus help you avoid the failure-to-file penalty. However, remember that the extension only applies to your filing deadline. You should pay whatever you can to limit penalties and apply for one of the relief options already outlined above.

Note that the penalty for not filing on time is ten times higher than the penalty for paying late, and if you don’t file, these penalties will stack on top of each other. That means that even if you can’t afford to pay, you should still file as that will help to limit your penalties.

Avoid Misleading Information With Damiens Law

Many tax resolution companies out there sugarcoat what they can do for you if you have tax debt. They make it sound like there’s a tax relief program you can apply for that will wipe out your debt. However, they’re just trying to get your business and ensure you don’t look up your options on your own. 

In a lot of cases, the big nationwide tax relief firms make promises that they cannot keep. If someone promises to erase your tax debt or get you a settlement before they know anything about your situation, that’s a big red flag that you should look for a different provider.

Remember that there is no one IRS tax debt relief program that’s going to solve all your problems. The IRS does offer options, but you must qualify for them, and you usually can’t just eliminate your tax debt completely.

So what should you do? Well, the first step is understanding your tax situation and researching the right option to help you remain in good standing with the IRS. Then, talk to a tax or legal professional who understands tax law and your best way forward.

At Damiens Law, we get to know your unique situation and explain your options for legitimate IRS tax forgiveness or relief. Our Mississippi tax lawyer will help you avoid working with rip-off companies and ensure you understand your rights. 

To get help now, contact the experienced attorney at Damiens Law to get started with better representation and tax relief guidance.