What Tax Debt Relief Options Are Available to You?
Want to know what tax debt relief options are available to you? Learn how tax corrections, spouse relief, appeals, and other IRS programs can help.
Owing back taxes can affect more than your bank account.
You may have to delay important purchases, cut household spending, or worry about how the Internal Revenue Service (IRS) will collect the money.
But paying the full amount is not always your only option.
Depending on why you owe the money and what caused the tax problem, you may qualify for different forms of tax debt relief.
For example, some taxpayers can challenge an incorrect tax bill, while others may qualify for relief from taxes linked to a spouse’s actions.
If you need help reviewing your situation, tax debt relief Chattanooga services may help you understand which options are worth considering.
So, what tax debt relief options are available to you?
The answer depends on your tax records, financial circumstances, and the reason behind your unpaid balance.
1. Audit Reconsideration for Incorrect Tax Bills
What if the IRS says you owe taxes because of an audit, but you believe its findings are wrong?
You may qualify for audit reconsideration.
This process allows you to ask the IRS to review an earlier audit decision when you have new information that could change the result.
You may request reconsideration if:
- You found receipts or records that were missing during the original audit.
- You disagree with the income or expenses used to calculate your tax bill.
- You missed the original audit because you never received the notice.
- The IRS prepared a tax return for you using incomplete information.
For example, suppose the IRS rejected a business expense because you did not provide supporting documents.
If you later find receipts proving the expense was business-related, you may use them to support your request.
The Taxpayer Advocate Service’s audit reconsideration information explains how this process works.
2. Innocent Spouse Relief
Sometimes, you may owe taxes because of something your spouse did on a joint tax return.
For example, your spouse may have left out income, claimed deductions that were not allowed, or reported incorrect information without your knowledge.
In certain cases, you may qualify for innocent spouse relief.
This option can protect you from responsibility for additional taxes caused by your spouse’s errors if you meet the IRS requirements.
The IRS considers factors such as:
- Whether you knew about the incorrect information.
- Whether you had reason to know about the errors.
- Your financial and personal circumstances.
- Whether it would be unfair to hold you responsible.
You generally apply using Form 8857, Request for Innocent Spouse Relief.
The Internal Revenue Service’s innocent spouse relief rules explain who may qualify.
3. Injured Spouse Relief
Injured spouse relief is different from innocent spouse relief, although the names sound similar.
This option may help when the IRS uses your share of a joint federal tax refund to pay your spouse’s separate debts.
These debts may include:
- Past-due child support.
- Certain federal tax debts.
- Unpaid state income taxes.
- Certain federal debts, including eligible student loan balances.
For example, suppose you and your spouse file a joint tax return.
Your spouse has unpaid child support, so the government takes the refund to cover that debt.
You may be able to recover the part of the refund that belongs to you.
To request this relief, you generally file Form 8379, Injured Spouse Allocation.
The Internal Revenue Service’s tax relief information for spouses explains the difference between injured and innocent spouse relief.
4. Collection Due Process Hearing
Receiving a notice that the IRS plans to levy your property or wages does not mean you have lost every chance to challenge the action.
In certain cases, you can request a Collection Due Process hearing.
This allows you to discuss your case with an independent appeals officer.
Depending on your circumstances, you may be able to:
- Challenge the proposed collection action.
- Question whether the IRS followed the required procedures.
- Raise certain arguments about the underlying tax debt.
- Discuss possible collection alternatives.
- Present evidence supporting your position.
Pay close attention to the deadline stated in your notice.
For many Collection Due Process notices, you have 30 days to request a hearing.
The Taxpayer Advocate Service’s Collection Due Process information explains your rights and the hearing process.
An IRS tax attorney in Chattanooga can help review your notice and prepare the necessary response.
5. Bankruptcy for Certain Tax Debts
Can bankruptcy remove tax debt?
In some cases, yes.
However, not every tax debt qualifies for discharge.
Certain older income tax debts may qualify if they meet specific legal conditions.
These include rules about:
- When the tax return was due.
- When the return was filed.
- When the IRS assessed the tax.
- Whether the return was properly filed.
- Whether fraud or other legal restrictions apply.
For example, a person with older unpaid income taxes may qualify for discharge if the debt meets the required bankruptcy rules.
However, recent taxes, certain tax penalties, and other tax debts may remain payable after bankruptcy.
The United States Courts’ information on debts that cannot be discharged explains the general restrictions and exceptions.
Speak with a qualified bankruptcy or tax attorney before choosing this option because filing bankruptcy can affect other parts of your finances.
How Do You Choose the Right Tax Debt Relief Option?
The right option depends on why you owe the money and what happened before the IRS assessed your tax debt.
Before choosing a solution, ask yourself:
- Is the amount the IRS says I owe correct?
- Did the debt come from my actions or a joint tax return?
- Has the IRS started collection action?
- Do I have documents that support my position?
- Can I afford professional legal assistance?
If you are unsure, an IRS tax attorney can review your records and explain which options may apply.
Avoid choosing a settlement or legal process without first checking its effect on your finances.
Conclusion
What tax debt relief options are available to you?
More than you may think.
Besides standard payment arrangements, you may qualify for audit reconsideration, spouse relief, a collection hearing, or bankruptcy protection for certain tax debts.
The important thing is to identify why you owe the money before deciding how to handle it.
A tax bill caused by an incorrect audit requires a different response from one linked to a spouse’s unpaid taxes.
Review your IRS notices, keep supporting documents, and seek qualified help when needed.
Making an informed decision can help you protect your rights and avoid paying taxes you do not legally owe.
