What is Tax Relief?
Tax relief is a government-provided reduction in the amount of tax that a person or business must pay.
Tax relief is provided to reduce the burden of taxation on taxpayers. It may be in the form of direct reductions in tax rates, deductions from taxable income, or both. Tax reliefs are typically targeted at particular groups to address their specific needs, such as those with low incomes, who may be subject to high marginal tax rates.
Tax Relief Made Simple
The process of filing taxes can be tedious and time-consuming. Tax Relief entities offer services such as tax preparation, consultation, and tax planning for individuals and businesses.
Federal Tax Relief Solutions
Tax relief may take one of various forms when it comes to filing taxes. You can reduce your tax liability by:
- Tax Deductions – This is a legal procedure that offers federal tax reductions on your taxable income as a result of expenses such as mortgage interest rates. It reduces the taxable income of an individual or a business.
- Tax Credits (also called Tax Incentives) – This is another category of tax relief that provides more savings compared to tax deductions. It is directly subtracted from the total tax amount after all deductions have been calculated. Tax credits are also known as tax incentive as it compensates for expenditures that the government finds significant.
- Tax Benefits (such as enrolling in a tax-free IRA or Individual Retirement Account) – These are also referred to as exclusions and they categorize specific types of income as tax relief which lessens the amount of tax you pay. The most common exclusion is the employer-based health insurance payment program.
Regardless of the form of tax relief you need, it will normally reduce your tax debt and help prevent any payments that are related to a tax underpayment or tax evasion penalties.
Tax Debt Resolution Options
Tax Debt resolution is the process of resolving tax debt with the IRS. There are many ways to resolve tax debt, and some are more effective than others.
- Offer in Compromise: This is a type of settlement that allows you to offer a lump sum payment in exchange for the IRS forgiving your balance. It can be an effective tool for those who don't have the ability to pay off their debts in full by a certain date.
- Installment Agreement: This is an agreement where you can make monthly payments over time until your balance is paid off, and this can be more affordable than an OIC because it does not require a lump sum payment upfront. It can also help
- Currently not collectible (CNC): The IRS will put the collection of your debt on hold, and won't take action against you. Payments are deferred until you are financially ready to make them.
Penalty abatement: The IRS may reduce or remove penalties from your balance, but you must first prove that you had a legitimate reason for not paying your taxes on time. Note that the IRS states that "a lack of funds, is not reasonable cause for failure to file or pay on time."
What Are The Ramifications Of Not Repaying Tax Debts?
Back taxes are funds that you owe the IRS and have not been paid on the due dates. They are subject to penalties, increased interest, and serious legal actions can be deployed if they remain unpaid. Some of the common actions include:
- Tax liens
- Wage garnishments
- Various penalties
- Seizure of property, assets
- Loss of passport privileges
- The IRS can press charges which may lead to prison time
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