A Guide To IRS Tax Resolution And Debt Forgiveness In Houston, TX

General CPA

guide to IRS Tax Resolution Blog

Taxes. Nobody likes to pay them, and if you fall behind on them, your life can become much more difficult.
The IRS is not a government organization to mess with, yet about $114 billion is owed in back taxes.

If you are struggling with back taxes, you will want to find out if there is a way to get some tax relief. Luckily for you, there is.

What is tax relief?

How does IRS debt forgiveness work? What is the process for qualifying for debt forgiveness?
This is your guide.

Before we can explain how you can get tax relief, you must understand what tax relief is. This is essentially the IRS accepting either a lower payment from you than what you originally owed, canceling the debt entirely, or delaying any further payments for your back taxes.

Obviously, none of this is a guarantee for just anybody and you have to meet certain criteria to get tax relief. These are some things that you can do to improve your chances.

Offer in compromise ?

One of the best ways to get tax relief is to make an offer in a compromise. If you have a large enough debt, you can propose to the IRS how much money you are willing to pay for that debt. While the IRS is not guaranteed to accept this compromise, there is very little risk from at least attempting to do this. If you get this accepted, you may only pay a fraction of the back taxes you owe to the IRS.

So, how does this work? The IRS considers four key aspects with people that are trying to propose an offer in compromise. The first aspect is the ability to pay your original debt. Are you capable of paying what you owe? Do you make enough money, or would this debt cause too much economic hardship?

If you have the right answers to these questions, you are a step toward getting this accepted.

The next two aspects are your income and expenses. Essentially, the IRS wants to determine if you have enough household income to pay off this debt while leaving you with enough money to live. As for your expenses, the IRS is measuring your life expenses based on the cost of living in your location and any possible dependents you have.

Then, there is asset equity. Even if you qualify for the first three aspects above, if you are sitting on a lot of savings or a lot of assets, the IRS may force you to sell your assets to get closer to paying your debt before they accept an offer in compromise.

Look into the options that you have here and come up with a proposal.

Look at your current finances

Something else that you need to do is take a long and hard look at your finances. If you want to do this, perhaps hiring a CPA (Certified Public Accountant) can help you with your taxes.

You want to look at your finances because there may be loopholes for you to get out of this, depending on your financial situation. That is because the IRS cannot legally take money from you if you do not have enough money and assets.

Sometimes, the IRS resorts to wage garnishment if they do not feel like you are making goodwill or have not proven able to pay your debt off. However, even then, there are certain income thresholds where they cannot touch you.

Let’s say that you are making around minimum wage. According to the U.S. Department of Labor, if you make less than $217.50 per week, the IRS has no legal jurisdiction to garnish any percentage of your wages. Just to make this clearer, they break this up by any pay cycle. So, if you make $942.50 or less per month, then the IRS still cannot touch your wages.

This gives you an idea of what income and financial thresholds you have to meet to be considered non-collectible. At the end of the day, the IRS cannot put someone in an impossible financial situation and create true economic hardship for them.

Therefore, you should review your finances and see if you can qualify for tax relief because you do not make enough money.

Form a tax payment plan

If you do not meet the qualifications for the two plans above, one option is to come up with a tax payment plan. What this can do for you is give you breathing room from the IRS before they decide to take more drastic measures.

For example, let’s say that they were attempting to garnish your wages because you have not proven that you can pay off your debt. One option to get rid of wage garnishment is to provide the IRS with a legitimate payment plan proposal and then stick with it once it is approved.

This option can also help you pay off your debt on your terms. You can create a much more manageable situation for yourself if you do it the right way vs. the situation that got you in this position in the first place.
It also allows you to form some goals and expectations of what you have to pay off every week or every month. This keeps you on a schedule and it gives you clear criteria for you to reach.

Innocent spouse relief

This option may be more complicated than the ones above, but it is something that can get you out of your tax debt. One thing that can lead to a bad marriage or even a divorce is disagreement on finances. It can even be money problems in general.

So, let’s say that the husband in this marriage was doing some sketchy acts to perform tax evasion and the wife had no idea about it. Suddenly, they are both liable for hundreds of thousands of dollars in tax debt.
However, the wife had no idea and no participation in any of these actions. On top of this, the wife may be trying to get a divorce because of the hidden actions performed by her husband. What can you do here? You can try to qualify for Innocent Spouse Relief. Understand that this is not a simple process and you will have to get an extensive burden of proof to achieve this.

So, what do you have to do to establish proof? The main thing that you have to do is establish deniability of knowing what your spouse did in this situation and point out that it would be unfair to hold you accountable for actions that your spouse did on their own.

If you succeed in this, you may be able to get at minimum partial tax relief.

Rely on human error

Something that you may forget in this process is that the IRS is human. What does that mean? It means they make mistakes; sometimes, they may screw up badly enough to unintentionally put someone else at financial risk.

This is why it is so important to keep careful track of your taxes and have a professional CPA by your side. When this happens, you can turn to someone who is organized and experienced to confirm your suspicions. That the organization made the mistake rather than you.

While no one wants to be in the middle of a process like this, it is still far better than being on the hook for something that you did not do. This is why you need to make sure that you know your books inside and out.

Then, you can go back to your books and look at your numbers closely. You can present this to the IRS and get tax relief if you have sufficient evidence.

Hire a cpa

So, if you need tax relief, one thing that you can do to help your situation is to hire a CPA. They can help you discover if any human error occurred on your taxes if you have a case financially to not be collectible or have an offer in compromise, plus potentially come up with a tax payment plan.

Do you need a Houston IRS resolution? Message us today to get answers.