Are you overwhelmed with federal tax debt? The Internal Revenue Service (IRS) features several programs to help you find relief and get back on track. One of the more recent programs is the Taxpayer Relief Initiative, which directly results from the pandemic.
In this guide, you’ll learn more about what the program entails, how to determine if you qualify and other ways to get help resolving unpaid tax debt.
What Is The Taxpayer Relief Initiative?
The COVID-19 pandemic wreaked havoc on the finances of many taxpayers. Consequently, the IRS unveiled the Taxpayer Relief Initiative to expand its current tools and resources that help taxpayers resolve unpaid tax debt. The agency also revamped its collection procedures to accommodate financially distressed taxpayers who have a track record of filing and remitting federal tax payments on time.
Benefits Of the Taxpayer Relief Initiative
Below is an overview of the perks taxpayers are afforded through this new initiative:
Extended Time To Pay Tax Owed
The short-term payment plan offered by the IRS is designed for individuals who owe less than $100,000 and can pay their tax bill within 120 days. However, the Taxpayer Relief Initiative extends this timeframe to 180 days to give you even more time to resolve your unpaid tax debt.
(Quick note: Long-term payment plans are still available for individuals or businesses who owe up to $50,000 or $25,000 in taxes, interest and penalties, respectively.)
Offers in Compromise
Suppose the IRS accepted your Offer in Compromise. In that case, you’d generally have to uphold the proposed terms (or make the payments per the schedule) for the agreement to remain valid. But the Taxpayer Relief Initiative has prompted the IRS to be a bit more lenient with taxpayers who are currently unable to make payments.
But if you haven’t proposed an Offer in Compromise, you can do so to resolve your federal tax bill for less than what you owe. (Quick note: You can use the tool on the IRS’s website to gauge your eligibility, but it’s also best if you reach out to a tax professional for additional guidance).
IRS Installment Agreements
Here are some additional changes to installment agreements under the Taxpayer Relief Initiative:
- Taxpayers who owe up to $250,000 are not required to provide financial statements and plead their case to get approved for an installment agreement if you propose a reasonable monthly payment. This amount should enable you to repay your tax debt within the 10-year statute of limitations on IRS tax debts.
- Installment agreements without an IRS-filed notice of federal tax lien are available to taxpayers who owe up to $250,000 for 2019.
- If your company closes its doors and you owe federal income tax, the IRS will automatically add this amount to your existing Installment Agreement (if applicable).
- You may be permitted to use the Online Payment Agreement system to request changes, like a new payment due date or reduced monthly payment, to your Direct Debit Installment Agreement.
Hardship Provisions
There are other hardship provisions in place to lend a helping hand if you’re overwhelmed by federal tax debt:
- You can request that the IRS pause its collection efforts against you by directly reaching out to the agency. If the IRS agrees to suspend collection activities due to “hardship” and marks your account as “currently not collectible,” you’ll get a six-month break from the IRS. (Be mindful that interest and penalties will still be added to your balance during this period).
- You could be eligible for relief from federal penalties associated with your failure to file, deposit or pay fines.
How To Qualify For The Taxpayer Relief Initiative
It depends on the type of relief you’re seeking.
For an installment agreement:
- If you’re requesting a short-term payment plan, your unpaid tax bill must be $100,000 or lower. Long-term payment plans are open to taxpayers who owe under $50,000 (or $25,000 for businesses). Apply online or call 1-800-829-1040 to get started.
For an Offer In Compromise:
- Start with the pre-qualifier tool on the IRS website to determine if you’re a good fit.
For a hardship provision:
- Call the number on the IRS notice to plead your case and request that the IRS delay collection efforts against you.
How To Get Help With Tax Debt
Ultimately, dealing with tax debt and analyzing your options for relief can be challenging and downright overwhelming. For this reason, it’s best if you have a dedicated team of tax professionals in your corner to help you assess your situation, decide which course of action is best and get to work on your behalf. The sooner you take action towards resolving your tax debt, the better to delay further collection actions.
