What is Federal Tax Relief?

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  • Written By: Erin J. Hill
  • Edited By: Bronwyn Harris
  • Last Modified Date: 10 August 2019
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Federal tax relief refers to a system or agreement in which the Internal Revenue Service (IRS) or other tax officials offer to a citizen who has not or can not pay his federal or state taxes. This offer is extended to those who have not defaulted on their taxes due to any illegal or criminal activity. Valid reasons for receiving federal tax relief include loss of employment, divorce, or other financial factors beyond the person’s controls. The relief programs are put in place to aid needy parties in the payment of their tax debts.

There are different kinds of federal tax relief, each being assigned to specific cases when deemed necessary. To determine the type of relief one may be eligible for, the tax officials will do a thorough check of the person’s financial situation and tax payment history. Upon gathering and researching all appropriate information, they can choose to offer one of four main types of tax relief.

The first type of federal tax relief is known as an Offer in Compromise agreement. This where the indebted person agrees to pay a lower amount than previously owed. The individual will work with the government to decide upon an amount that is fair to both parties, with the final amount being based primarily on income and ability to pay. This amount must be paid in full upon mutual agreement or settlement.


Another kind of federal tax relief is the Installment Agreement. With this agreement, the individual may pay the full or a lower amount after a thorough review of his finances has been completed, but instead of paying all at once he will make monthly installments until the debt is cleared. Again, the amount paid with each installment will be based on the individual’s financial situation and ability to pay.

For those who simply have no way of paying any amount of their tax debt, tax officials may give them a relief known as Not Collectible Status. This federal tax relief option is usually reserved for those who have lost their jobs, become disabled, or have otherwise become financially unable to make even small payments without enduring tremendous financial hardship.

Spouses and ex-spouses of delinquent tax payers are also offered federal tax relief when they are being forced to make payments on a tax debt that is not their own. Although in many locations a married couple’s finances and debts are filed together, in some cases one spouse is in no way at fault for the tax debt and is eligible for the Innocent Spouse Program. This clears the non-faulted party of any debt to the federal government that was incurred by the guilty spouse.

In order to receive any type of federal tax relief, one must file an appeal with the IRS or government agency stating the reasons behind the failure to pay. Hiring an experienced tax attorney is a good idea, when feasible, because these professionals know the ins and outs of the tax system and can help individuals find options that everyday citizens may not be aware of. If an attorney is out of the question financially, it may be possible to find one who will do the job for free, or pro bono. To find a lawyer who will work pro bono, contact lawyers in the area or write to the closest bar association for information.


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