About IRS Tax Relief Programs

As April 15 nears, most people scramble to get their federal income tax returns done on time. When you fail to meet the deadline and you owe taxes, you might be subject to some tax penalties. A few available programs might help you with your tax problems, though.

What is Tax Relief

Tax relief does not mean you won't have to pay your taxes. Tax relief programs, instead, are strategies that could help you reduce the amount of tax you owe the government. Many of these programs are legal -- there is nothing fraudulent about using them to limit the amount of taxes you have to pay immediately to the government.

Tax Installment and Current Noncollectible Status

Taxpayers sometimes find themselves in difficult financial conditions that impair their ability to fulfill their tax obligations to the government. However, the IRS has a program that you might qualify for if you work with experienced tax consultants. Under a classification of "current noncollectible status," the IRS is saying your financial condition is so bad you cannot afford to make even the smallest payment. Eventually when your current noncollectible status ends, you might have to work out a suitable installment payment option.

Income Averaging Relief

Income averaging relief is a program for individuals in financial distress who may owe back taxes. Through income averaging, the IRS will use an average of your past income in past years, rather than your current income level, to calculate your current tax liability. This may be useful if your income levels tend to fluctuate wildly from year to year.

Innocent Spouse Relief

Consider this scenario: You were married and then got divorced. A few years after the divorce, you receive an IRS letter informing you that the joint tax returns you filed with your divorced spouse were in error. Furthermore, the IRS wants to collect back taxes from you because, for the tax year in question, you did not report all the income your spouse earned that year. Because both of you filed a joint return at that time, the IRS wants you to pay for the missing tax. However, because of your current separation status -- and if you can establish that you had no personal knowledge of the underreporting of your joint income -- a tax consultant may be able to use the innocent spouse (sometimes known as the injured spouse) tax relief program to get you out of any liability for the unpaid taxes.

What about Tax Amnesty

"Tax amnesty" is often confused with forgiveness of tax obligations owed to IRS. The tax amnesty program, which is also referred to as "Voluntary Disclosure Policy," is a program designed to discontinue the possible criminal prosecutions of taxpayers, if they submit their returns and back taxes before the IRS actually files a criminal action. If you believe that the IRS might prosecute you for some tax-related issue, try to correct the issue and the IRS might not go ahead with its prosecution plans.