Success Bug | BOOST Your Net Worth

Join Today!

What You Need To Know About the IRS Debt Forgiveness Program

The Internal Revenue Service (IRS) is a United States government agency. It provides tax assistance to taxpayers and enforces federal tax law. Congress created the IRS in 1862, along with the original income taxes under Internal Revenue Code section 6001(a). The IRS began operations on July 1, 1862, as a new bureau of the Department of Treasury. The original name was the Bureau of Internal Revenue (BIR).

The IRS is responsible for collecting taxes, providing relief for tax debt, and enforcing tax law. It offers several programs to help taxpayers resolve their tax debt. One such program is the IRS Debt Forgiveness Program. This program allows taxpayers to have part or all of their tax debt forgiven. To be eligible for the program, taxpayers must meet certain requirements.

The IRS Debt Forgiveness Program has two main components: the installment agreement and the offer in compromise (OIC). The installment agreement allows taxpayers to make monthly payments over some time to resolve their tax debt. The OIC is a settlement agreement between the taxpayer and the IRS / tax professionals in which the taxpayer agrees to pay a lump sum to resolve their tax debt.

In this article, we will discuss the installment agreement and the OIC in more detail. We will also explain the eligibility requirements for each program and how to apply.

What is the IRS Debt Forgiveness Program and What are its Components?

The IRS Debt Forgiveness Program is a program that allows taxpayers to have their tax liabilities reduced or eliminated. There are two main ways to qualify for this program: by meeting the requirements for a Fresh Start Initiative, or by having a financial hardship.

To be eligible for the Fresh Start Initiative, you must meet the following criteria:

  • Have a total tax debt of less than $50,000
  • Have filed all of your tax returns for the last four years
  • Must be up to date on your monthly payments
  • Your installment agreement cannot have been in default for the last 120 days
  • Your bank account cannot be subject to wage garnishment
  • Tax bill must be for a tax year that falls outside of the statute of limitations (meaning you cannot be prosecuted for not paying)

If you do not meet the requirements for the Fresh Start Initiative, you may still be eligible for the IRS Debt Forgiveness Program if you can prove that you have a financial hardship. To qualify, you must meet the following criteria:

  • You cannot afford to pay your tax debt in full
  • You have tried to negotiate a payment plan with the IRS but have been unsuccessful
  • Cannot afford to make your monthly payments
  • Have received a notice of federal tax lien or levy
  • You are acing bankruptcy or foreclosure
  • You have suffered a natural disaster or another significant event

How Much of My Tax Debt Can be forgiven?

The amount of your tax debt that can be forgiven will vary depending on your circumstances. In most cases, the IRS will only forgive part of your tax problems, but in some cases, they may forgive the full amount. You will need to speak with a tax professional to find out how much of your debt can be forgiven.

What is the Process for Applying for the IRS Debt Forgiveness Program?

The process for applying for the IRS Debt Forgiveness Program is relatively simple. You will need to fill out Form 656 and send it to the IRS. You will also need to provide extensive financial information, including your most recent tax return, bank statements, and credit report. The IRS will review your application and let you know if you are approved.

What are the Consequences of Participating in the IRS Debt Forgiveness Program?

There are a few potential consequences of participating in the IRS Debt Forgiveness Program. First, the forgiven debt may be considered taxable income. Second, your credit score may be affected. Finally, you may need to pay taxes on the amount of money that was forgiven. It is important to speak with a tax professional before applying for this program to understand the consequences of participating.

Eligibility Requirements for the Installment Agreement and the Offer in Compromise

You are eligible for an installment agreement if you cannot pay your tax debt in full, you have filed all of your tax returns for the last four years, and you are up to date on your monthly payments.

You are eligible for an offer in compromise if you cannot afford to pay your tax debt in full, you have tried to negotiate a payment plan with the IRS but have been unsuccessful, and you cannot afford to make your monthly payments.

How to Apply for the Installment Agreement

To apply for an installment agreement, you will need to fill out Form 9465 and send it to the IRS. You will also need to provide your most recent tax return, bank statements, and credit report. The IRS will review your application and let you know if you are good to go.

How to Apply for the Offer in Compromise

To apply for the offer in compromise, you will need to fill out Form 656 and send it to the IRS. You will also need to provide extensive financial information, including your most recent tax return, bank statements, and credit report. The IRS will then review your application and let you know if you are approved.

What Happens if you Don’t Meet the Eligibility Requirements?

If you don’t meet the eligibility requirements for the IRS Debt Forgiveness Program, you may want to consider other options such as bankruptcy. Please check with your tax professional before filing so that you have the most up-to-date information and know your options.

Key Takeaway

Overall, the IRS Debt Forgiveness Program can be a great way to get out of your financial situation. It’s important to meet the eligibility requirements, and if you have any questions, please check with your tax professional before filing. Remember, the sooner you take action, the sooner you can start getting your life back on track.

Join 4000+ Individuals Growing Their Net Worth With The Success Bug

  • Get started with stocks, crypto, and real estate
  • Boost your credit and destroy your debt
  • Join our Net Worth Community
"I finally feel on top of my financial situation. Never would I think I'd look forward to checking my accounts."
Ozei Evans

Success Bug Member

2022

Leave a Comment