Are tax relief companies legit?
Some tax relief services charge hundreds or thousands of dollars for their services. Most tax relief companies are legitimate services, but some aren't. Therefore, before you hire a tax relief company, take time to do your research on the company's bona fides.
They say they'll apply for IRS hardship programs to lower or even eliminate your federal tax debts. They even promise to stop back-tax collection. But the truth is that most taxpayers are unlikely to qualify for the programs these scammers advertise. In many cases, these companies don't settle your tax debt.
Some companies charge a flat percentage of the amount owed to the IRS, such as 10%. Others charge an hourly rate that might range between $275 and $1,000. Some companies will not accept clients with a tax debt of less than $10,000.
The IRS will typically only settle for what it deems you can feasibly pay. To determine this, it will take into account your assets (home, car, etc.), your income, your monthly expenses (rent, utilities, child care, etc.), your savings, and more. The average settlement on an OIC is around $5,240.
The IRS has the final say on whether you qualify for debt forgiveness. In general, though, the agency looks for taxpayers who: A total tax debt balance of $50,000 or below. A total income below $100,000 (or $200,000 for married couples)
An offer in compromise (OIC) is an agreement between a taxpayer and the Internal Revenue Service that settles a taxpayer's tax liabilities for less than the full amount owed. Taxpayers who can fully pay the liabilities through an installment agreement or other means, generally won't qualify for an OIC in most cases.
An offer in compromise allows you to settle your tax debt for less than the full amount you owe. It may be a legitimate option if you can't pay your full tax liability or doing so creates a financial hardship.
No, tax relief won't wipe out your tax bill—and it could cost you more in the long run—but it might make paying what you owe to the federal government a lot more manageable.
The IRS offers a tax debt forgiveness program for taxpayers who meet certain qualifications. To be eligible, you must claim extreme financial hardship and have filed all previous tax returns. The program is available to certain people only, so contact us to find out if you qualify.
The IRS will sometimes consider a settlement that allows you to pay a reduced amount of what you owe in back taxes, which is called an offer in compromise. You must convince the IRS that you can't afford to pay what you owe and offer to pay the reduced amount in a lump sum or in short-term installments.
What is the IRS 6 year rule?
6 years - If you don't report income that you should have reported, and it's more than 25% of the gross income shown on the return, or it's attributable to foreign financial assets and is more than $5,000, the time to assess tax is 6 years from the date you filed the return.
First-time penalty abatement
This is the main form of relief the IRS offers to taxpayers (both individuals and business owners) to cover first-time penalties. It's also your chance to show a logical and justifiable reason for not filing or paying on time.
While there are no income requirements, the IRS has certain eligibility standards that must be met in order to qualify for the program, including: You must have filed all required tax returns for the previous three years. You must not owe more than $50,000 in taxes, including interest and penalties.
Payment options
The IRS may be able to provide some relief such as a short-term extension to pay (paid in 120 days or less), an installment agreement, an offer in compromise, or by temporarily delaying collection by reporting your account as currently not collectible until you are able to pay.
The Fresh Start Program is legitimate, but the way that people use these phrase isn't always accurate.
New IRS Fresh Start Initiative Helps Taxpayers Who Owe Taxes
Penalty relief Part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill.
To be eligible for the IRS Hardship Program, taxpayers must demonstrate that they are facing significant financial hardship and are unable to pay their tax debts.
Taking the step of setting up a payment arrangement with the IRS does not trigger any reports to the credit bureaus. As mentioned above, the IRS is restricted from sharing your personally identifiable information. While a Notice of Federal Tax Lien could be discoverable by lenders, the payment plan itself would not.
But statistically, the odds of getting an IRS offer in compromise are pretty low. In fact, the IRS accepted only 13,165 offers out of 36,022 in 2022. It's not impossible, though.
Determining if You Need to Hire an Attorney
As a taxpayer, you have the authority and ability to take advantage of any of the IRS programs you qualify for without the assistance of a tax attorney. You're also not obligated to hire an attorney to negotiate with the IRS or resolve a tax situation.
What happens if you owe the IRS more than $25000?
For individuals who establish a payment plan (installment agreement) online, balances over $25,000 must be paid by Direct Debit. See Long-term Payment Plan below for other payment options.
- Best for money-back guarantee: Anthem Tax Services.
- Best for businesses: Larson Tax Relief.
- Best for complicated tax issues: Community Tax Relief.
- Best for customer service: Instant Tax Solutions.
You're taking on risk. Like all loans, RALs come with risk, including an increased debt burden if your refund is denied, delayed or lower than expected. As costly as RALs can be in the short-term, they can be devastatingly expensive over the long-term should anything go wrong with your refund.
Even so, the IRS can go back more than six years in certain instances. Unfortunately, there is a limit on how far back you can file a tax return to claim tax refunds and tax credits. This IRS only allows you to claim refunds and tax credits within three years of the tax return's original due date.
Internal Revenue Code (IRC) 6502 provides that the length of the period for collection after assessment of a tax liability is 10 years. The collection statute expiration ends the government's right to pursue collection of a liability.
