Do You Qualify for Tax Forgiveness? Eligibility Guidelines & Steps to Take Next

Last updated: Feb 27, 2019

For some people, tax season is a scary time. If you get hit with a bill that you can’t pay, not paying at all might seem like the only thing to do. However, if you don’t pay your taxes, the penalties will soon stack up on top of the original debt — and the IRS will collect it someday.

Tax forgiveness might be your best option. If you’ve never qualified for tax forgiveness before, it’s worth another look: you may be surprised to find that you qualify.

Wondering who’s eligible for tax forgiveness, and the steps you’ll need to take? We’ve got it all broken down into easy steps — keep reading to learn how to get the tax relief you need.

What is Tax Forgiveness?

The IRS Debt Forgiveness Program is what it sounds like: a way for taxpayers to get a reduction in the amount they owe the IRS. Debt forgiveness exists to protect you from a debt you can’t actually pay.

To get debt forgiveness tax relief, you’ll need to make an Offer in Compromise, or an agreement to pay the reduced debt through an IRS-approved payment plan. If you want to pay your remaining debt all at once, you can, but you can also opt to pay in manageable monthly installments instead.

This is all part of the IRS’s 2008 Fresh Start initiative, which exists to help people pay their taxes. Over the years, the IRS has made this program even more flexible, so more people can qualify.

Who Qualifies for IRS Tax Forgiveness?

Wondering if you can get an Offer in Compromise plan? It’s easier than you might think.

Anyone who doesn’t have the financial assets needed to pay their tax bill can qualify. If you don’t have enough income or assets to pay or your expenses make it impossible to pay, you’re a viable candidate for debt forgiveness.

You will need to show proof of your financial situation. And the IRS does require that you’re up to date with tax payment and filing requirements before you qualify for tax relief.

Note that if you’re in the midst of ongoing bankruptcy proceedings, you can’t qualify for debt forgiveness.

However, thanks to an expansion of the Fresh Start program, the vast majority of people facing difficulties paying their taxes will qualify for tax forgiveness. You can use the IRS’s online pre-qualifier to see if you do.

How to Get Forgiven of Tax Debt

Now, let’s take a look at the steps involved in securing tax debt forgiveness.

1. Consult a Tax Professional

While not required by the IRS, it’s smart to speak to a tax professional before attempting to negotiate tax forgiveness. You can often get a free consultation to find out if you’re on the right path.

2. Fill Out the Forms

Next, you’ll need to fill out the appropriate forms for your situation. Again, a tax professional can help you understand which forms you need.

You’ll most likely need to fill out the 656 Offer in Compromise form, as well as either the 433-A form if you’re an individual, or the 433-B form if you’re a business.

3. Pay Fee and Initial Offer Payment

You might need to pay an application fee if you’re above a certain income level. However, if you meet the income requirements, the fee and your initial offer payment may be waived.  

Other Tax Relief Programs

In addition to this kind of tax forgiveness, there are other ways to get tax relief. Here are a few of the programs you can consider instead.

Innocent Spouse Relief

If you’re facing IRS collections due to a tax debt incurred by your spouse or ex-spouse, Innocent Spouse relief may be for you. The IRS has guidelines for innocent spouse relief qualification. If you meet them, you’ll no longer be held responsible for your spouse’s tax problems.

Wage Garnish Relief

If you owe a lot of money to the IRS, you might have your wages garnished. This means they can take money straight out of your paycheck for your tax bill. But if you can show that you aren’t left with enough money to get by after wage garnishing, you can get released from this program.

Uncollectible Status

If you can’t make the payments on the taxes you owe, you can also request temporary relief in the form of “uncollectible status.”

When you qualify as uncollectible, the IRS freezes your collection account and no longer pursues you for repayment. Although this is a temporary form of relief, it can give you time to get back on track or apply for another program listed here.

Statute of Limitations

If you’ve been struggling with tax debt for a long time, it may actually be close to expiry.

After the date of assessment, the IRS has 10 years to collect tax payments. If you’re approaching that 10-year mark, it’s worthwhile to check if the statute of limitations will cancel out your tax debt.

If you’re close but not quite at the ten-year mark, you might qualify for programs that make your repayments more manageable in the meantime.

Will Tax Forgiveness Help You This Year?

If tax forgiveness sounds like just what you need to get through a difficult financial time, there’s probably an idea here that you can qualify for.

While many people can use the Fresh Start initiative for tax relief, those who don’t qualify might still qualify for one of the other options listed. A tax professional can help you see the full picture based on your unique situation.

We offer the kind of help you need to get the best tax relief for you. Check out our customer reviews here.