Getting caught in massive tax debt can be very scary. Regardless of whether you earn a little or a lot, owing IRS taxes can breed a series of problems. The worst is that when failing to settle your tax debts early it can balloon to an unaffordable amount. If taxes are overburdening you, don’t fret. There are various tax debt relief options that can help you resolve your back tax problems:

Offer in Compliance

This program enables you to settle tax debts for an amount that is less the owed figure. To qualify for this program, you must show that you are truly incapable of paying the full tax and if doing so can result in a financial crisis. Various factors are considered including your income, expenses, ability to pay and asset equity. Before applying for this program, first, check your eligibility. In the event you have an ongoing bankruptcy proceeding, then you may not be eligible for Offer in Compromise program. Those who opt to hire professional help to help them file the offer should first check their qualifications. If your application is accepted, then be sure to meet all the terms provided in Section 7 of Form 656. This includes making all payments and filing required tax returns. For a rejected application, you can make an appeal within 30 days. Form 13711 allows you to request an appeal for Offer in Compromise.

Look for Tax Deductions

A tax deduction is a dollar amount that the IRS allows you to subtract from your adjusted gross income, or AGI, making your taxable income lower. The lower your taxable income, the lower your tax bill.

IRS Tax Forgiveness Program

This is a program that makes it easy for you to qualify for Offer in Compromise or installment programs. IRS has come up with programs like Fresh Start and Student Loan programs that seek to help taxpayers settle tax debts for a small amount of the total liability. The programs allow you to pay a percentage of the total debt depending on your financial status. They will evaluate factors such as your future one-year income potential down from 4 years. They’ve also come up with Allowable Living Expense calculation formula that factors in your bank charges, credit card payments among other allowances.

Penalty and Interest Abatement

Although it is not very common, this program is offered by the Internal Revenue Service to help individuals who’ve shown they are in serious financial troubles and can’t pay their taxes. Tax penalties are abated and you are given relief for failing to file your tax returns on time or to deposit taxes.

Filing for Bankruptcy

Chapter 7 of the Bankruptcy Code allows you to relieve yourself from income tax debts. But again, filing for bankruptcy will be an option only if you qualify for the requirements to be discharged from tax debts. Chapter 7 can provide you up to full discharge of all your allowable debts. Chapter 13 can also give you tax relief but you may need to repay some as it discharges some debts.

Not Currently Collectible

This is a program by IRS where they voluntarily agree not to collect taxes for about a year or even more. It means that you have no ability to paying your tax debts. They will only do so after confirming your financial condition. It is very useful and you can file for an appeal to stop a lien, levy, denial, seizure or even termination of the installment agreement. The appeal enables you to explain how the situation can be resolved without forceful seizures or levies.

Tax Exclusion

This program classifies various types of income as either taxable or tax-free. It reduces the amount you report as your gross income. When your income is excluded from being taxed, then it will not show up on your tax return and in case it shows up then it will come in another return section. Some incomes may be excluded not just because they are hard to measure but to encourage you to participate in various activities.

Tax Credit

Unlike tax deduction that reduces the amount of your income subjected to tax, tax credit gives you more savings by reducing your tax bill from dollar to dollar. It is applied to the amount you owe after making all the deductions from your taxable income.

Conclusion

Tax debt is not different from any other type of debt. It can bar you from enjoying a smooth financial life. However, tax debts should not be the source of your miseries even if you earn less. Programs and tax debt relief options such as tax credit, offer in compromise, tax deductions, bankruptcy, not currently collectible and tax forgiveness among others can help you resolve most of your tax woes.