How To Eliminate Tax Debt: Does The IRS Actually Wipe Out Back Taxes?
As a tax relief company, we see how harmful the cycle of debt is every day. Learning how to eliminate tax debt is one of the best things you can do for your wallet.
Fortunately, the IRS acknowledges this phenomenon and created a program that can eliminate your back taxes.
Keep reading to find out how to wipe out your tax debt in 2022!
How Does One Gain Tax Debt?
Owing money to the IRS is more common than you’d think.
Unexpected life circumstances, family emergencies, and natural disasters can cause a taxpayer to accumulate tax debt. And unfortunately, this process tends to escalate until the taxpayer takes initiative to get out of debt.
Sadly, the IRS doesn’t make this process easy. Like many federal programs, there’s lots of red tape and hoops to jump through. This is why we recommend you work with a professional tax relief company to get the assistance you need.
What Is The Fresh Start Program?
Despite its name, the Fresh Start Program isn’t a program. Rather, it’s an umbrella term for multiple tax resolution programs the IRS offers.
The IRS Fresh Start Program was created to help people drowning in unpaid tax debt. When back taxes aren’t paid on time, interest and penalties start accruing.
What Is An Offer In Compromise (OIC)?
An offer in compromise allows the taxpayer to settle their tax debt once and for all. The IRS will calculate your reasonable collection potential (RCP).
If you meet all qualifications, one of which is offering more than the IRS calculates is the least amount you could pay, then your chances of settling your tax debt increase.
How An OIC Can Eliminate Your Tax Debt?
Due to this one-time payment, the offer in compromise is very desirable. Instead of navigating how to catch up on back taxes, the OIC will save you time and money.
Other tax relief programs don’t eliminate your tax debt. Instead, they give you the flexibility to catch up on back taxes on their terms.
Though each program has its benefits, most taxpayers who owe a large amount of back taxes would benefit from an OIC. However, due to being the preferable program, requirements are strict.
Requirements To Apply For An Offer In Compromise (OIC)
Though this list may be shorter than you expected, keep in mind that meeting these requirements is the bare minimum. You must demonstrate paying your back taxes in full would result in severe financial hardship.
Here’s what you must have:
- Prove your inability to pay (prove income, expenses, and asset equity)
- File all missing or incomplete tax returns
- Made all required estimated tax payments for the current year
- Your reasonable collection potential (RCP) must be less than the amount the taxpayer offered to settle for
Remember that when putting together all of your documents, the more evidence you give the IRS of your difficult financial situation and inability to pay, the more likely you’ll be accepted.
The Takeaway
Check out TaxRise’s free tax consultation to find out where you stand financially. From this quick call, you’ll be able to determine if you qualify for our services and which tax relief program will work best for your unique situation.
TaxRise has helped thousands of taxpayers just like you resolve their tax issues and erase their tax liability. Now it’s your turn.
