Tax Relief

Q: How to Avoid Tax Penalties?

The easiest way to avoid tax evasion penalties, or an infraction that results in a tax underpayment penalty, is to seek advice from an income tax relief professional.

Q: Do You Need Tax Relief?

If you are not sure about your tax debt, you can to check to see if you have an outstanding balance with the IRS by going to IRS.gov/account. You can sign up in about 15 minutes and you only need to provide your identity once. If you already know your tax debt, you can either make payments or learn more about seeking tax forgiveness in the form of a tax compromise.

Q: What happens if I file my tax return late?

If you file late, tax penalties can mount up fast – at a rate of 5% of the owed amount for each month you are past due. If you are over 60 days late, the minimum penalty is a whopping $100 or the entire amount of the tax owed, whichever amount is less. If you file a tax extension, the penalty is removed.

Q: What is earned income relief?

Another name for earned income relief is an earned income tax credit (EITC). To get this credit, you need to show proof of earned income, have an investment income that is under $3,650 for the claimed tax year, possess a valid social security number, claim a certain tax filing status, and be a U.S. citizen or resident alien during the entire tax year.

Q: What Is the Estimated Tax Penalty?

When you file your taxes but underpay the amount due, you will be assessed an estimated tax penalty. Therefore, if you do not withhold enough in taxes or you don’t pay enough in estimated taxes, the IRS will charge this penalty. This penalty is 5% - the rate assessed to borrow your underpaid funds from the U.S. government. Complete IRS Form 2210 to request a waiver when you file to avoid being penalized.

Q: What is the penalty for underpayment of an estimated tax?

You will receive an underpayment penalty if you pay under 90% of your tax liability. The standard penalty is 3.398% of your tax underpayment. This penalty is reduced slightly if you file and pay your taxes before the April 15 deadline. For example, let’s say you owe $1,000 in federal income tax for the year, 2020. You must pay at least $900 ($1,000 x 10% or $100) to avoid the penalty for underpayment of an estimated tax.

Q: How do I know if a tax relief company is legit?

You do need to test the waters first to see if a tax relief company is legit, as some scams do exist. Make sure you speak to a licensed Enrolled Agent (EA), tax attorney, or CPA. These credentialed professionals can represent your case to the IRS. Also, the prices you pay should be reasonable. Never pay an amount that sounds excessive. Check about security, as well. How is the company set up to receive paperwork? Does it have a secure online portal?

Q: Did COVID-19 affect tax relief policies?

Yes, the pandemic has influenced some of the policies offered for tax relief. Most of these policies emphasize deferral periods and allow taxpayers extra time to file their returns. Some of the programs also allow employers and employees to deduct credits for emergency leaves or employee retention during specific dates of the COVID-19 period.

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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: