Do you have this year’s tax bill from the Internal Revenue Service (IRS)? Don’t panic because you’re not alone. But if you owe the government and you don’t have enough money to pay your bill, what happens?
Fortunately, there’s no need to worry if you find yourself in this situation. The IRS has some available options for tax relief that might benefit you. You can break down your debt into payments or decrease the amount of tax you pay to the government through tax relief.
No, your tax bill will not be canceled out by tax relief, and it could cost you more in the longer term, but it will make paying what you owe to the federal government far more achievable.
What Is Tax Relief?
Tax relief only means setting up a payment plan or reaching an agreement with the IRS; it’s not about eliminating your tax duty. Instead, it’s about making the tax debt you owe simpler to manage.
Special tax relief is often provided to victims of natural disasters, like hurricanes and wildfires. Disaster victims may be eligible for extensions of deadlines and qualify for claims on their federal income tax returns for casualty losses.
Ways To Get Tax Relief
If you can’t afford to pay in full when they are due, you have some choices when it comes to tax management strategies. Four ways to consider are given below.
Offer In Compromise
The IRS could help you to pay your tax debt for much less than you owe through what is regarded as an offer in compromise if you’re having trouble paying your full tax bill.
According to the IRS, an offer in compromise “may be a legitimate option if you can’t pay your full tax liability, or doing so creates a financial hardship.” The IRS may weigh criteria like your capacity to pay, revenue, expenses, and assets when evaluating your application.
IRS Repayment Plan
The IRS will allow you to split your full balance into smaller payments. You have to owe $50,000 or less in combined taxes, fines, and interest to qualify for a long-term payment plan (paying over 120 days or longer).
Your tax bill can be as big as $100,000 on a short-term payment plan of 120 days or less. If you don’t have the money to pay your tax bill in full, while IRS payment plans may be beneficial, they come at a price.
You may pay a setup fee of up to $149 alongside other penalties and interest until the balance is paid in full. Payments can be made based on the method you prefer.
Penalty Relief Or Interest Abatement
If you fulfill certain qualifications, such as not getting any penalties for the previous three tax years or paying or arranging payment for any taxes due, the IRS forgives the penalties you’ve been billed.
And if you qualify, you will still owe your taxes, but your overall debt will be smaller after the fines are deducted from your unpaid balance.
Another way to consider is taking out a personal loan if you don’t have the cash to cover your tax bill. Before going this path, decide if you can obtain a personal loan for less than an offer from an IRS payment plan.
Suppose you want to use a personal loan to cover your tax liability, research loan rates and terms to ensure that you get the best possible rate. Before you apply, it may also be useful to check your credit reports to know what lenders will see as they evaluate your application.
It will not benefit you to attempt to hide from your tax bill. In reality, as interest and fees begin to accumulate, by trying to ignore them, you’ll make your tax problem worse.