The concept of tax forgiveness has been around for decades. In fact, it was introduced as a provision for the Internal Revenue Code of 1986. The purpose was to provide relief from tax arrears for those who had a difficult financial situation and were unable to pay their taxes. Taxation forgiveness allows taxpayers to lessen their liability or tax obligation. Some common conditions for tax forgiveness include: charitable donations, interest income on loans, student loans, mortgage interest and child care costs.
Taxation forgiveness provides a tax reduction and provides some tax relief to low-earning taxpayers. The most obvious beneficiaries are low-earners with children who are dependent upon both parents. Qualifying children of a dependent mother must not be dependent solely on their parent. Children of a non-dependent father may also qualify under certain conditions. Gaps in income between family members that result from a disability or similar event may also qualify for tax forgiveness.
There are a couple of different ways to determine tax forgiveness eligibility. Those who are not qualified because of past tax debts are considered to be permanently ineligible. Other qualifying taxpayers must demonstrate an inability to repay and must be able to show that they would be unable to repay the current amount. Many times these people have no other source of income and rely on the money provided by the government. Others may be able to pay back some or all of the back taxes through public service employment.
Allowances and exemptions can often significantly reduce or eliminate one’s taxable income. Both standard and earned income tax are included in calculating your taxable income. To complicate matters, there are also several allowances and exemption types. Some tax professionals call them “tax mitigation” or “excess payments.”
Alliance provisions in a child support agreement or a marital settlement agreement may also determine eligibility for tax forgiveness. If a parent or grandparent provides monetary support for a dependent child or a dependent spouse, such payments are subject to income tax. The parent or grandparent may also be eligible for tax forgiveness if the taxpayer receives an inheritance or gift from a non-relatives member of the deceased’s family. In order to receive a tax refund, however, the gift must be received by the taxpayer within the year in which the payment was made.
Certain circumstances also qualify a non-dependent spouse as an exception. Taxation forgiveness for married taxpayers who remarry within three years of being married is granted if the new spouse did not become taxable immediately before remarriage. This exception is also granted for taxpayers who remarry because of a death of a dependent spouse. Similarly, if a dependent spouse has a similar educational opportunity or vocational field to their other spouse, then the spouse may also qualify for tax forgiveness. In addition to these circumstances, some spouses will qualify for tax forgiveness if they remarry after attaining a certain amount of income or if they split their estate between their spouse and another person and then file joint returns.
For some people, tax forgiveness may also be attainable if they meet certain requirements. To qualify, the taxpayer must have fully paid all tax liabilities when they first filed their returns or must have filed a return for a later year, but have not yet attained total tax debt. Furthermore, a child or dependent child of the taxpayer may also qualify for tax forgiveness. Another way in which children of taxpayers may obtain tax forgiveness is if their parents become unemployed or lose their job through death, divorce, or other circumstances. Additionally, children of a disabled person who has qualified for benefits under the disability act (SSDI) may also qualify for tax relief.
Taxpayers who want to obtain tax forgiveness must understand, though, that applying directly to the IRS can take a long time. Creditors who want their delinquent accounts repaid often prefer to settle with the taxpayers themselves rather than go through the process of applying to the IRS. Therefore, it can take quite some time before the creditor receives the application and ensures that it qualifies for tax forgiveness. Finally, while the IRS appreciates compromise and flexibility in settling delinquent accounts, they do not generally prefer to work with taxpayers who apply directly.