What is Tax Relief?
Tax relief is a series of government-approved programs that offers taxpayers various options to either pay-off or settle their tax debt.
Commonly referred to as the “Fresh Start Initiative” or “Fresh Start Program,” these services protect taxpayers from IRS or state revenue agencies’ relentless collection practices. The IRS has unique collection powers that allow them to place aggressive penalties and interest fees on unpaid debt as well as utilize wage garnishments, bank levies, and property liens to strong-hold taxpayers into paying as much as possible on a tax liability.
When taxpayers qualify for a tax relief program, the IRS no longer has the authority to collect outside the agreed-upon resolution plan unless the taxpayer first breaks the agreement’s terms.
WHO IS ELIGIBLE FOR TAX RELIEF SERVICES?
Taxpayers can utilize tax resolution services to resolve both personal and business tax liabilities.
To qualify for tax relief, you must be able to prove that paying your tax balance would cause significant financial hardship. What determines financial hardship varies from person to person, so the IRS utilizes key determinations to qualify taxpayers for relief programs, including:
- Taxpayer’s zip code
- IRS allowable expenses
- Extenuating circumstances
The severity of your financial hardship determines what kind of tax relief help is available to you, and it is up to the taxpayer to prove their hardship. To best represent their case, many individuals choose to invest in the help of a tax relief company that specializes in preparing and presenting hardship cases to the IRS.
How to prove financial hardship
While the IRS has guidelines for what constitutes a financial hardship, the responsibility to prove that hardship falls to the taxpayer or tax relief company hired to represent the taxpayer.
To prove your hardship to the IRS, you will need to provide several financial documents such as your most current bank statements, proof of income for the last three months, and any assets or savings accounts you may have.
The IRS may also examine your tax returns and other financial reports to determine if you experienced financial hardship.
WHAT TAX RELIEF SERVICES ARE AVAILABLE?
There are multiple tax relief services or programs available to help taxpayers resolve their tax liability.
Offer in Compromise
An Offer in Compromise is the most sought-after resolution and is an agreement between a taxpayer and the IRS to settle a tax bill for an agreed-upon amount.
Properly negotiated, an Offer in Compromise can reduce a taxpayer’s liability to a small fraction of the original amount. Taxpayers who achieve their Offer in Compromises through TaxRise often see a reduction upwards of 90%.
However, an Offer in Compromise is challenging to achieve and reserved for those in severe financial hardship, leaving the taxpayer unequivocally unable to repay their federal tax debt.
If the IRS rejects your proposed offer settlement, that does not necessarily mean that you are ineligible. Per the Taxpayer’s Bill of Rights, taxpayers have the right to challenge the IRS’s position and request a review from an outside court along with additional rights reserved to protect taxpayers from the IRS.
Installment Agreements allow a taxpayer to pay an agreed-upon monthly payment each month toward their tax balance. As long as the taxpayer stays current on their monthly payments, the IRS will not use aggressive collection activities such as levies and liens. While the tax balance will no longer accrue failure-to-pay penalties, interest fees still apply for the balance’s remainder. Additionally, while you still hold a tax balance, the IRS has the right to use any eligible tax refund you may have toward your balance.
Installment Agreements only last for a maximum of six years. If your tax liability is relatively small and monthly payments would be able to eliminate it over six years, an Installment Agreement may be the right resolution for you.
Currently-Non-Collectible is a status that the IRS places a taxpayer in if the taxpayer cannot pay their taxes due to their current financial situation but may be able to repay once their situation changes.
While Currently-Non-Collectible does not necessarily remove a tax liability from a taxpayer’s file, it does stop any collection activity, including bank levies, wage garnishments, tax liens, and threatening letters from the IRS until the taxpayer’s financial situation changes.
This program is especially beneficial for senior taxpayers or taxpayers on a fixed income.
Often, what causes a taxpayer not to afford their tax debt is not their actual balance — it’s the exorbitant penalty fees accrued on the debt.
If penalties are your primary concern, you may qualify for penalty abatement where the IRS eliminates or reduces your penalty fees.
You can only qualify for penalty abatement once, so make sure you consult with a tax relief specialist before attempting this tax relief program.
HOW TO GET TAX RELIEF FROM THE IRS
Just like you can file your taxes on your own, you can apply for tax relief yourself at no additional fee.
However, depending on your tax liability severity, it may be beneficial to consider applying for tax relief with a tax relief provider’s help.
If your tax debt is relatively low or you don’t believe that the IRS will consider your financial hardship case, you can apply for an installment agreement with FORM 9465.
The IRS will determine your monthly payment based on your disposable income at the end of each month. Installment payments set up by a taxpayer often range from $500 to $1,000 a month.
However, we encourage you to seek professional tax resolution services to receive your best possible tax resolution.
At TaxRise, our staff consists of tax professionals, tax attorneys, enrolled agents, and accountants all working together to make sure that our clients receive the best possible tax resolution.
HOW DO TAX RESOLUTION COMPANIES WORK?
Tax relief companies provide taxpayers with professional assistance negotiating a tax resolution with the IRS or state revenue service.
To work on your case, tax relief providers obtain a Limited Power of Attorney. This just means that they can legally view your IRS file and speak with the IRS on your behalf. It does NOT give them the authority to act on your behalf or accept a resolution without your permission.
Your tax relief provider will build your resolution case to present it to the IRS or state after obtaining the Power of Attorney.
Your tax relief provider must have professional credentials such as an enrolled agent license or a Tax Attorney license to negotiate on your behalf. A reputable tax resolution company will have multiple EAs and Tax Attorneys in-house to handle their caseload.
While no tax relief provider can guarantee a resolution outcome, TaxRise utilizes the same IRS technology when determining your qualification status. After we compile all necessary documents, a tax professional personally reviews your case before submitting it to the IRS for negotiation. When you choose to work with TaxRise, our team of tax professionals negotiate your resolution with the IRS on your behalf, so you don’t have to.
SHOULD YOU HIRE A TAX RESOLUTION COMPANY?
Hiring a professional tax resolution company to help resolve your tax debt is recommended but not always necessary. There is no law requiring you to seek professional representation when negotiating a tax resolution, and some people find the cost of hiring a professional is cost-prohibitive.
Be aware that not all tax professionals are the same. CPAs and tax attorneys often claim to offer tax aid or relief from tax liabilities but do not specialize in negotiating and resolving tax debt. It’s natural to want to work with your local or community CPA to resolve a tax liability, but partnering with a tax resolution company may yield more specialized expertise and better results.
Generally speaking, we recommend that you consider resolving your tax liability yourself if you owe less than $5,000 in tax debt. This is because the cost of hiring professional assistance can end up being more than your initial tax liability.
When you have a small tax balance (less than $5,000), the probability of you qualifying for any more than a monthly payment plan is relatively low.
However, if you have $10,000 or more in tax debt (and we’ve resolved tax debt as large as a million dollars), that’s when it’s best to invest the money to settle your tax debt correctly.
WHAT’S THE DIFFERENCE BETWEEN BUSINESS AND CONSUMER TAX RELIEF?
There is little difference between business and consumer tax relief in terms of the actual tax relief programs. The biggest differentiator between the two is that business tax relief is often much more complicated to secure. Businesses struggling with tax debt almost always require help from a tax relief professional.
While consumer tax debt is tied to a social security number (SSN), business tax debt is connected to an employer identification number (EIN) which means multiple people may be responsible for a business tax debt.
So, how does the IRS decide who the responsible parties are for a business tax debt? First, they look at who has any type of authority over the business’s financials, including:
- People who many the business’s financial decisions
- People who have signed or are authorized to sign on the business’s checking account
- People who have the power to pay or make direct payments of the bills
- People who have the duty of tax reporting
That means that not just the business owner is responsible for repaying a business tax debt; the IRS can sometimes target employees as low as a managerial level for an employer’s tax debt.
At that point, the IRS will apply the same collection tactics on the private citizens, such as wage garnishments, bank levies, and tax liens.
HOW LONG DOES THE TAX RELIEF PROCESS TAKE?
At TaxRise, our goal is to get you your best possible resolution — even if it takes extra time and work on our end.
In general, an average TaxRise client takes 3-8 months to resolve their tax liability with the IRS. However, every case is different. For simple cases where a client is responsive with each request for required documents, it can take as little as 30 days to complete a resolution.
If a case is particularly complicated, or a client has difficulty getting the necessary documents together, it can take upwards of a year or more. In some cases, we will secure a temporary solution for our clients to limit collections and penalties while working toward a better resolution.
CAN YOU GET INSTANT RELIEF FROM GARNISHMENTS, LIENS, OR LEVIES?
The only way to permanently stop wage garnishment or bank levies is to enroll in a tax resolution program or repay your debt in full. Any company that claims you will receive immediate relief
Since some programs such as an Offer in Compromise or Currently-Non-Collectible status can take time to negotiate, TaxRise often places our clients in temporary Installment Agreements to stop garnishments and levies. At the same time, we build your case for a better resolution.
WHAT IF YOU DON’T QUALIFY FOR TAX RELIEF
Not everyone is qualified for tax relief services. If your financial situation prevents you from qualifying even for an Installment Agreement, it may be time to consider additional solutions.
As a rule of thumb, it is better to owe virtually anyone other than the IRS, so borrowing from friends or family or taking out a personal loan may be an option.
HOW TO GET STARTED
We offer complimentary phone consultations for anyone interested in resolving their tax debt. This free service allows you to determine if you are a candidate for a tax resolution program and whether partnering with TaxRise works for your situation without the need to make an on-site office visit.
If you choose to become a client, we will immediately submit our Power of Attorney to stop IRS collection activities and begin our investigation to determine your best resolution strategy.
During this consultation, you may discover that professional tax relief is not in your best interest. If that’s the case, our Tax Resolution Officers will tell you up-front and guide you toward some helpful resources to resolve your tax debt on your own.
If you’re wondering if tax relief is an option for you, you’ve come to the right place. At TaxRise, we offer complimentary tax consultations first to determine whether or not you are eligible for the IRS Fresh Start Program before onboarding as a client.
To see if you qualify for the various tax relief programs:
- schedule your free tax consultation OR
- call us directly at 833-419-7473
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