Why Tax Relief Is So Important

Taxes are an essential component of society because they fund public projects like roads, buildings, schools, and emergency services, to name a few. However, individual tax filing can be difficult because many unique tax implications are attached to each transaction and living situation.

For example, some investments may be taxed lower than your normal tax rate, while others may incur a much steeper tax bill depending on when you bought or sold it. If you aren’t keeping track of your taxable transactions throughout the year, then you may face sticker shock at tax time when you get your tax bill from your accountant or tax software.

Since overdue taxes and IRS penalties can seem invasive, tax relief is essential for personal finance. Tax relief is the large umbrella that contains tax credits and deductions from the IRS, tax payment plans, and assistance from third-party tax relief companies who work with the IRS on your behalf.

This article will describe how tax relief works and why it is so important.

It’s Not Like Other Collections

The most important distinction between the IRS and any other collections agency is the scope of its power. While any lender may send a past-due bill to a collections agency, most don’t have direct access to your personal property.

The IRS can garnish wages directly from your paycheck, place liens on your property, making it difficult to sell, and can levy your assets such as your car or investment accounts to help settle your balance. Since the IRS has such broad collections capabilities, it’s best to take advantage of your tax relief benefits before they decide to pursue collections actions.

The silver lining to IRS collections is that they are reasonable to work with if you communicate and do your best to pay your bill. While getting them to forgive your taxes or settle for an offer in compromise can be difficult, they may help you get on a payment plan or pause your payments if you can prove the financial hardship they cause.

Penalities Can Be Steep

Another reason to take advantage of tax relief instead of forgoing filing your taxes is the penalties imposed by the IRS to taxpayers who fail to file. Penalties can range from 5% to 25% of your entire tax bill owed, depending on how many months delinquent you are on your tax bill. Not only would you have to pay your taxes, but you may also need to pay a minimum payment of $210 or 100% of your balance (whichever is less) if you file more than 60 days late.

If you make a poor estimate on how much tax you owe, you may also owe an accuracy-related penalty which can be up to 20% of any additional taxes owed. Accuracy-related penalties stem from understated and underpaid taxes owed on your return. So if you are negligent substantially underpaid your taxes, then you may face this penalty.

There are certain penalty abatements available if you can prove that you weren’t negligent, but it is much better to file the first time correctly.

There Are Plenty Of Options Available

Tax bills can be a pain, but fortunately, many tax relief options are available through the IRS and other entities.

First, the IRS understands that different dynamics have different expenses and financial capabilities. This is why they offer deductions and credits to families and people with various expenses that shouldn’t be taxed. The standard deduction helps many people lower their taxable income so that when their tax bill is calculated, it is more affordable. Likewise, there are tax credits for children, post-secondary expenses, and more, which immediately lower your tax bill.

In addition to tax credits, there are many tax relief programs available to people who cannot afford their current tax bills. The IRS offers monthly payment plans that can prevent further collections actions as long as the taxpayer makes their payments on time.

If you don’t know where to start on your tax relief journey, then you may want to consider working with a reputable third-party tax relief specialist. Tax relief specialists cannot guarantee your tax bill will be lower, but they can help you navigate repayment options, identify tax credits, and ultimately help you find a solution. The most reputable tax relief companies offer complimentary consultations and limited refunds if they cannot help you with your tax bill.

Final Thoughts

Although tax relief can be a foreign concept, there are plenty of excellent resources available to the taxpayer to mitigate the impact of a large tax bill and the prospect of paying back taxes.

Research is your best friend when it comes to finding adequate tax relief, so make sure you check out our guides and reviews as you look for the optimal tax relief solution for your situation.