Tax Debt Forgiveness
Did you ever wonder if there is any chance that you could escape your piling debts? Are you working so hard trying to pay your tax debts and it seems like it will take an eternity before you can clear your name? Is there really a chance that you can start anew, debt-free? If so, then you probably haven’t heard of tax forgiveness yet.
It is possible that the government, particularly the Internal Revenue Service, will cancel all your due tax debts allowing you to come out clean but you need to be informed of the rules and procedures before you become eligible for this. The following are the processes that the IRS undertakes in forgiving your tax.
- If you have no cash, no assets, and basically no means to pay your tax debt, this may be a ground for you to qualify for a fresh start. The IRS will waive your old and existing debts and shall charge you with another one in the event that you are already working or running your own business.
- In some very rare instances, the IRS will put people in their “uncollectible status” which will cancel your debts and inhibit the government from ceasing your properties as collaterals. This action by the IRS is on a case-to-case basis.
- If cancellation of the entire tax debt is not possible, the government will offer you an option to avail of the Offer in Compromise which obligates you to settle an amount which is reasonably lower than your original debt. This is the most common form of settling tax debts in the United States.
- Filing a case of bankruptcy automatically cancels your old tax debts and exempts you from paying another one. A bankruptcy can only be approved if the governing authorities have proved that you are already incapable of paying your taxes due to serious illness, inability to work, or foreclosures of all your valued assets and properties.
In the event that you are applying for tax forgiveness at the same time that you have a foreclosed property, you will be privileged not to pay the taxes incurred of that asset due to the effectivity of Mortgage Forgiveness Debt Relief Act of 2007. This is because if you have a foreclosed residential house, the amount spared from that shall be automatically considered as a taxable income and subject to payment to the IRS. If you are approved of tax forgiveness, you will also not be liable to pay your mortgage.
However, not everyone is lucky enough to be forgiven on their tax debts. If the Internal Revenue Service has been chasing you for a long time to pay your tax debts after your several attempts of negotiating tax forgiveness, there is still hope that you will not be filed for a lawsuit. Propose an agreement that you will pay the entire debt on an installment basis that is favorable and practicable to your current economic situations. This way, you will not be forced to dole out your entire income just to pay your old taxes and at the same, you will be able to clear your name and start anew.