It’s well known that taxes are part of a country’s economy and, as such, are an obligation of the citizens. The state takes this fraction of each person’s income and invests in public order projects.
However, the amounts to be paid as taxes are often quite high and end up conflicting with the needs of the citizens. This may be because the citizen’s income is too low or if extraordinary situations prevent the payment of such amounts.
This is where tax relief programs come into play, functioning as viable options for those individuals who find themselves in a bad situation to make their tax payments promptly.
But this only leaves us with more questions: How does tax relief work? How can one opt for a plan? In this article, we’ll explain much more about this figure, how one can qualify for it, and the best tax relief programs available.
What is tax relief, and how does it work?
Since taxes can often become quite costly for certain individuals, the government has created programs or policies to deal with this. These programs are designed to address payments through deductions and exclusions. However, they also seek to provide credits and payment opportunities for those with very high tax debts.
By having deductions in the final payment of taxes, citizens are more likely to pay their tax burden, which also ends up benefiting the state.
However, the state’s also in charge of controlling the policies that may generate exemptions or deductions. This allows any individual who meets these characteristics to qualify for such plans supported by the law.
What conditions qualify me for tax deductions?
There are several conditions to qualify for tax relief; however, they require a broad knowledge of policies and the different deductions available. However, there’s one major condition that governs this process, and that’s whether to take the standard deduction or not.
Every taxpayer is presented with a choice when it comes to paying their taxes: to take a standard deduction or to itemize their deduction using Form 1040 or 1040-SR. However,
when taking the standard deduction, you cannot apply those found on the form, so you may lose money.
After deciding whether to take the standard deduction, the next step is to work on the itemized deductions. These deductions are expenses that can be eliminated from the total gross pay as long as the individual has not opted for a standard deduction. In financial terms, it’s best to fill out the deductions offered by the tax relief programs as long as you know how to do so.
Among the most common options to opt for a tax deduction are the following:
- Payments related to Mortgage interests
- Donations made to charity
- Additional state or local taxes
- Certain types of expenses incurred through gambling
- Unreimbursed medical or dental expenses
- Interest payments related to investments
Additionally, certain policies apply to those affected by extreme hardship. These include natural disasters, losses covered by insurance, or theft.
Can I opt for a tax credit, too?
In addition to the option of reducing the burden to be paid through taxes, there’s another type of tax relief known as tax credit. This is applied at the end of the total calculation to be paid to reduce the overall cost.
This type of relief is often described as an incentive since the government grants it as a reimbursement for expenses that it considers beneficial or worthwhile.
In many cases, you can opt for both a tax deduction and a credit at the same time.
If I have tax debts, are there tax relief programs available?
Going into debt because of tax payments is stressful and often greatly destabilizes an individual or family. The government can often initiate a forced collection, leaving someone in financial hardship.
However, there’s the IRS Fresh Start, which is designed to offer benefits to taxpayers in the way they will make payments on their outstanding debts. Among these, we can find:
- Offer in compromise: It’s a program available to taxpayers who cannot pay their entire burden immediately, allowing them to pay a reasonable portion of their income that’s less than the total amount due.
- Currently not collectible: A program designed for people whose monthly income is too low to pay taxes without being financially compromised. This type of program prevents the money from being forcibly collected while stopping the accumulation of debt. It’ll remain in place until the taxpayer is again able to make payments.
- Installment agreement: Monthly installment payments over a long period, with interest applied.
- Penalty abatement: These are mitigating factors to the inability to pay the taxes immediately. These include the death of the taxpayer or a family member, natural disasters, incapacitation, serious illness, etc.
How do I qualify for all these benefits?
Due to the lack of knowledge in the area, we often pay much more than we owe in taxes. Therefore, it’s advisable to research and then find specialized advice.