There are millions of people who file for tax debt forgiveness every year. Just like others, it is one of the financial benefits people get to get rid of the loan amount or get some relaxation in the same.
Before we land upon the different ways for tax debt forgiveness, here is what it means.
What is tax debt forgiveness?
It is yet another type of financial service or leverages that one can avail when having a debt over his or her head. The overall chances of tax debt forgiveness depend on the individual’s financial situation and status. For instance, if an individual borrows money from a commercial lender and later on, your request for tax debt forgiveness which gets accepted. Then the borrower has to report the amount of tax debt forgiveness in the income tax files. The details of the cancelled amount are reported on the IRS Form no 1099-C of Cancellation of Debt.
Here are some of the plans that simplify the process of tax debt forgiveness for a borrower and lender.
While carving these tax debt forgiveness programs the Commissioner of IRS, Shirley Peterson said – “you can’t get blood from a turnip, and when we’re dealing with turnips, we’re better off cutting our losses and moving on.”
Program 1 – The Life Jacket
In case you have taxes on your head, but you have lost the source of income resulting you can’t pay the tax. Then, you can go for tax debt forgiveness under “uncollectible status.” Using this process, the IRS freezes the already collected amount in the collection account. This helps the borrower take enough time, stand firm financially, and then get back to pay the amount later. It is the best way to stop wage levies immediately.
Program 2 – Fresh Start
As the term suggests, it reflects starting over the financial cycle over again. Here, the borrower is required to file a request under Chapter 7 of bankruptcy. After witnessing the individual’s financial state, the person is often discharged from the responsibilities of paying certain debts and given a chance to start over fresh again. Before approving the fresh start claim, the lender authority or IRS goes through the financial stability of the individual to find out if the person would be able to pay the tax or not.
Program 3 – Wage-Earner’s Repayment Plan
Rare people know that income tax amount is dischargeable in bankruptcy. Since 1966, this rule has been making highlights and helping people who are on daily wage-earning and have a debt on their head. This includes the rules and processes of chapter no. 13 of bankruptcy which says that the taxpayer can pay back the leftover amount depending on his or her earning status and capabilities.
The last line
When it comes to feeding the family or paying the whopping amount of debt, people often go for the former one. This makes people file a request for tax debt forgiveness following a detailed process. There are numerous plans and policies which, when collaborated can help an individual to choose from different options.
