IRS Streamlined Installment Agreement Requirements and Benefits

Federal tax debt is a serious issue. The government possesses a few more tools than the average creditor, and unlike some debts, the IRS doesn't easily forgive tax debt. The IRS expects you to pay back what you owe to the best of your abilities, whether a few hundred dollars or several hundred thousand. The urgency with which the IRS will pursue your tax liability may depend on the size and severity of your tax debt. The IRS usually employs two main collection actions to coerce payment: the federal tax lien and the tax levy.

A tax levy is a physical claim of your property, including your home, if it comes down to it. A tax lien is a legal claim of everything you own, superseding other creditors and barring you from securing future financing with your current assets. The IRS will often employ a tax lien before resorting to a levy. Few things can protect a tardy taxpayer against a tax lien. But if your debt is low enough and you act quickly, you can utilize a streamlined installment agreement to avoid a federal tax lien.

What Is an IRS Streamlined Installment Agreement?

Installment agreements are a monthly payment plan wherein you pay off a portion of your tax debt for a maximum of 72 months until you pay it off entirely (including accrued interest, ongoing interest, and penalties). In contrast to short-term payment plans (paying off lump sums within 180 days), installment agreements require regular monthly payments to avoid defaulting.

You must make the payments per the initial installment agreement or any subsequent approved installment agreement. Yet not all installment agreements are made equal. There are four different installment agreements a taxpayer may qualify for, depending on their total debt and willingness to agree to a direct debit monthly withdrawal by the IRS. These four installment agreements are:

If you want to qualify for a streamlined installment agreement, your total federal tax debt needs to be $50,000 or less, and you must agree to make payments through direct debit or payroll deduction. Like every installment agreement, you must be up to date with all tax returns, or the IRS will not accept your deal, meaning filing all late returns even if you’ve already been penalized.

If your tax debt is just above $50,000, you can make a lump sum payment to the IRS. Do this to bring yourself below the $50,000 threshold before entering into an installment agreement. If your tax debt is $25,000 or less, you can enter into a streamlined installment agreement without direct debit or a payroll deduction.

IRS Streamlined Installment Agreement Benefits

A streamlined installment agreement allows you to enter a monthly payment plan with the IRS:

A streamlined installment agreement helps you avoid a federal tax lien if your debt is $50,000 or less. Furthermore, you can apply for both streamlined and guaranteed installment agreements online.

Guaranteed vs. Streamlined Installment Agreements

Streamlined installment agreements are comparable to guaranteed agreements, which require you to owe $10,000 or less. You must be entirely updated with your tax returns and outstanding due taxes. Furthermore, you must not have entered into a previous installment agreement with the IRS in the last five years to qualify for a guaranteed installment agreement.

The difference between a streamlined installment agreement and a guaranteed installment agreement is that a guaranteed installment agreement has maximum longevity of three years. Meanwhile, a streamlined installment agreement usually splits your debt into 72 monthly payments by default. Both agreements allow taxpayers to avoid a federal tax lien and, by extension, a levy – if they do not default on their agreements.

What If I Owe More?

Suppose you owe more than $50,000 to the IRS and cannot meet the minimum before entering a payment plan with the government. In that case, your only remaining option is to file a non-streamlined installment agreement, also known as a routine installment agreement. You cannot file a non-streamlined installment agreement online. To enter into a routine installment agreement with the IRS, you must fill out Form 9465, Installment Agreement Request, and Form 433-F, Collection Information Statement, and send both in by mail or at your nearest IRS field office.

A routine installment agreement is available to taxpayers with a total debt of more than $50,000. In contrast to a streamlined or guaranteed payment plan, a standard installment agreement does not ensure that the IRS won't place a federal tax lien on your tax account. It also requires a thorough financial checkup. This means processing may take more time than the other, more straightforward installment payment plans.

Tolling Period and Partial Payment Installment Agreements

While the IRS reviews your request, they postpone your debt expiration date, often referred to as a tolling period. Your tax debt expires after ten years. Despite this, the months the IRS might take to review your installment request don't count towards that timer. Furthermore, you will need to pay your debt off within 72 months. Partial payment installment agreements are a rare fourth option for taxpayers who cannot pay back what they owe before their debt expires. Partial payment plans allow you to pay as much as you can.

You must submit a Collection Information Statement for the IRS to determine that you cannot pay off your entire tax debt. However, the IRS reserves the right to charge you more if your financial situation improves. This is why most tax professionals will recommend an offer in compromise instead. This similar payment plan limits your debt, and you cannot alter it afterward. However, it can be challenging to qualify for an offer in compromise. Most tax professionals don't recommend sending the IRS a request without deliberating it with a professional first.

What Happens If I Don’t Pay?

One way or the other, the IRS will try to get cash from you. If you cannot pay off your tax debt and the IRS determines that your finances are insufficient to act on your account, the IRS will deem you currently non-collectible. However, this freezes the timer on your debt, and interest continues to accrue slowly. If you don't pay, the IRS will begin to levy your assets and wages until your debt is gone.

This means claiming your property and taking a portion of every paycheck directly from your employer. If you are self-employed, the IRS can access your bank accounts instead. Levies are seriously financially damaging. It isn't worth challenging the IRS on your debt – unless you have the evidence to prove there's an error. In these cases, you have other means of recourse, including the Independent Office of Appeals and the US Tax Court. Otherwise, consider a payment plan as soon as possible.

IRS Statutes of Limitations for Tax Refunds, Audits, and Collections

One of the functions of the IRS is to ensure that taxpayers adhere to their tax liability. To that end, the IRS attempts to combat the so-called “tax gap”, an estimated gap in the nation’s total tax liability and the money the IRS is pooling together from estimated payments and withheld taxes. To reduce that tax gap, the IRS must audit taxpayers, especially those with the potential to limit or skirt their tax liability the most. But there are limits to the IRS’s power, reach, and timing. Thanks to statutes of limitations, the IRS cannot audit taxes from ten years ago nor demand that debt be owed on tax refunds from the 1990s. Understanding these limits can help taxpayers better navigate their current tax situation and redirect more useful energies to maintaining a healthy record of the past several years, knowing how far back the IRS may reach.

Understanding IRS Statutes of Limitations

A statute of limitations is a time limit imposed on any claims or actions the IRS may take against taxpayer accounts. If you’ve heard of the statute of limitations, it may have been in a legal context. For example, if a person commits a certain crime with a statute of limitations, they may not be prosecuted for that crime. Some crimes have no statutes of limitations, such as murder, famously. Tax issues are far, far less serious than a murder charge. And as such, there are fairly strict time limits imposed on the IRS (and the taxpayer) to follow through with these issues. In general, there are three significant statutes of limitations that you will want to remember:

  1. Statute of limitations on claiming a tax refund from the IRS;
  2. Statute of limitations on performing and completing a tax audit, and;
  3. Statute of limitations on collection actions against a tax debt.

Statute of Limitations on Tax Refunds

A tax refund is composed of any excess money the IRS has received from you that will not go towards your tax liability. Tax refunds can also be earned through refundable tax credits, such as the revised child tax credit or the earned income tax credit – meaning, even if your estimated payments or tax withholding was not enough to cover the entirety of your tax liability for the last year, your tax credits might have taken care of the remainder, and left a little bonus. Generally, the IRS sends any tax refunds on your account back to you as soon as possible.

Failing to do so would mean paying interest on overpayment – yes, the IRS imposes interest on its debt to you the same way interest is applied on taxpayer debts. But just because you may be potentially entitled to a tax refund does not mean that you automatically receive one. If you are eligible for a refund the IRS had not assessed, you must claim your tax refunds through IRS Form 843 or risk losing hundreds or thousands of dollars of potential money back from the IRS. Your time limit for doing so is three years from the date you filed your original tax return or two years from the date you paid the excess tax.

If you miss these deadlines, you may no longer be eligible to receive the tax credits or tax refund for that particular tax return. There are certain exceptions. If you have a tax refund due to tax deductions caused by bad debt, you have up to seven years to claim it. The statute of limitations also does not apply if you cannot take care of your financial affairs at the time due to mental or physical disability. The other two significant statutes of limitations are imposed on the IRS rather than the taxpayer.

Statute of Limitations on Tax Audits

Audits are the IRS’ way of double-checking tax accounts that are more likely to make mistakes on their taxes or lead to lost taxes. In some cases, the IRS will automatically audit more taxpayers that qualify for certain tax credits, such as the EITC, to ensure that all applicants are properly found eligible. In other cases, the IRS picks up on potential accounts to audit based on a computer algorithm that crawls through millions of tax returns and corresponding information returns from businesses, banks, and other institutions, to determine discrepancies and send out red flags. Sifting through millions of tax returns is difficult, and auditing all the ones that stand out is impossible.

This is why the IRS only performs audits sparingly – for example, only about 0.25 percent of all tax returns sent to the IRS in 2019 were subject to an audit versus about 0.9 percent in 2010. That number is slated to increase as the IRS receives more funding and agents. Still, your chances of being audited by the IRS remain relatively slim each year – and are increasingly slim if you do not fall into the top or bottom most tax brackets and review your returns carefully. For taxpayers who do find themselves on the business end of the IRS’ magnifying lens, it may be of some comfort to know that the IRS has a strict time limit for when any given tax audit must be completed.

That time limit, under most circumstances, is three years from the date your tax return is due. If you file your tax return on Tax Day 2022, the IRS has until Tax Day 2025 to complete its audit of that return. There are exceptions to this rule, as well. The IRS has up to six years from the date you filed your tax return to audit it if you omitted a substantial amount of income, at least 25 percent of your total income for that year. The IRS also has up to six years to audit your return if you have income related to undisclosed foreign assets of more than $5,000. Finally, the statute is lifted for tax fraud and other crimes, meaning the IRS can investigate your return at any time.

Statute of Limitations on Collection Actions

Last but not least, the IRS can go after a taxpayer for having a substantial tax debt, to the point that the IRS can make a legal and physical claim on the taxpayer’s income and assets if need be. Yet, despite these collection actions, the IRS limits how long it can pursue a tax debt before that debt must be resolved. This statute of limitations is ten years plus tolling periods.

Tolling periods, in this sense, are extensions levied by the IRS onto a debt timer due to uncollectibility, such as an ongoing bankruptcy case, being outside of the country for extended periods of time, or military service. The statute of limitations on tax debt also serves as a timeframe for taxpayers who cannot pay off the entirety of their tax debt but can still make monthly payments to pay off most of their debt. For these partial payment plans or potential offers in compromise, keeping the ten-year rule in mind helps.

Taxpayers cannot bury their heads in the sand for ten years and expect the IRS to disappear. The IRS’ interest in closing your case grows over time, and they can levy your home, property, assets, and paychecks to pay for your debt. If you agree you owe the IRS but can’t pay due to your current financial situation, it may place your account in currently not collectible (CNC) status. Statutes of limitations help taxpayers manage their expectations when working with the IRS and offer you more options throughout the process. However, no two cases are entirely alike.

Seeking Trusted Tax Expertise

At Rush Tax Resolution, we counsel individuals and businesses on understanding and navigating the legal complexities of tax liability, helping to negotiate with the IRS to dispute or resolve tax debt. Whether it’s an IRS audit, penalty, collection, or another tax-related issue, we have the tax professionals and expertise to meet your needs. Contact us today to learn more about Rush Tax Resolution and what we can do for you.

What You Need to Know About Tax Resolution Services

Trouble with the IRS? You may be tempted to deal with it yourself – but before you get in over your head, it would be wiser to consider professional tax resolution services. While the IRS works through a code of conduct that holds the taxpayer’s rights in high esteem, it can still be a daunting task to work through its list of demands, rules, and tax regulations. The process of getting current with your missing tax returns and making a payment to cover your outstanding tax liability is complicated enough as it is – you will need all the help you can get if your problem is more profound, such as dealing with potential collection actions or appealing against their decision to bill you and prove their mistake.

What Are Tax Resolution Services?

Tax resolution or tax relief is getting back in the IRS’s good graces after missing a payment, missing a deadline on your returns, or incurring a tax debt due to a penalty, miscalculation, mistaken deduction, and so on. Specific law clinics and law firms specialize in helping taxpayers sort out their problems with the IRS and providing tips for managing and reducing tax liability and filing better-prepared tax returns.

For the most part, tax resolution involves working with the IRS to negotiate the best solution to the taxpayer’s problems. There are no dirty tricks, no simple or quick fixes, and no cheats. A tax resolution professional worth their salt will be upfront about your tax account's issues and difficulties. After a brief investigation and thorough consultation, most of the work will involve helping you navigate the IRS’s demands and meet them as quickly and reasonably as possible.

When Do I Need Tax Resolution Services?

Tax resolution services are usually meant for taxpayers in debt to the IRS for one reason or another. Being in debt with the IRS usually means you are in continuous danger of incurring a collection action – one of the IRS’s methods for coercing payment after a period of inactivity or non-cooperation on the taxpayer's part. When the IRS decides to issue a collection action against you, it usually begins by ordering and filing a Notice of Federal Tax Lien in the public record, notifying all applicable creditors of your non-viability as a lender, and the IRS’s superseding claim on all your assets and property as collateral for the debt you owe.

In other words, you cannot seek financing or liquidate your assets without going first dealing with your tax debt. Liens are not the IRS's only tool to push for tax debt resolution. Levies are a step beyond, wherein the IRS makes a genuine claim of your property or assets, one at a time, until your debt is paid. This means emptying bank accounts, claiming and selling real estate, and repossessing vehicles. Suppose you have no assets or accounts eligible for a levy. In that case, the government can work with your employer to claim a percentage of every paycheck or compensation you receive, depending on your number of dependents.

Facing a lien or a levy can be seriously detrimental to your financial security and potential future. While liens no longer affect your credit history the way they used to, they can still force you to miss payments or make life much harder. Even if you do not believe you have the financial means to solve your problems with the IRS, you are heavily encouraged to contact them nonetheless. The IRS’s willingness to issue liens and levies against your tax account is generally based on three things:

  1. The sheer value of your tax debt, your likelihood to try and bail on it.
  2. Your inability to pay on time, as per a previous agreement.
  3. The degree to which you ignore the IRS’s attempts to contact you.

How Is a Lien Released?

The IRS quite helpfully explains that the only natural way to get rid of a federal tax lien is to pay in full. While this is true, it bears mentioning that they mean you must satisfy your outstanding tax balance. However, your outstanding tax balance can be modified based on the agreement you meet with the IRS. This is where a tax resolution service begins to become crucial. They can help you navigate how you might be able to reduce your tax liability, provided you are eligible for a reduction in your tax debt. Aside from seeking to have a lien released through full payment (your lien can take up to 60 days to remove after the final payment has been made), you can seek to have a lien modified if it helps you resolve your tax debt with the IRS. A lien can be adjusted in one of two ways:

What Can I Do Against a Levy?

A levy can be a bit more difficult to combat and is often more urgent. Suppose you are in the middle of working on a payment plan with the IRS when they begin to issue a levy on your property. In that case, you may be able to stop the levy by entering a particular type of installment agreement, wherein the IRS makes automatic withdrawals from your bank account until your debt is paid. If the IRS levies and sells your property, and you only enter into a payment agreement after the sale, there is no natural way to get it back. Levies are a severe problem and one you shouldn’t be tardy in addressing.

What Are My Payment Options?

Most ways of resolving your tax debt with the IRS involve paying them – but you have multiple ways of doing so, depending on what you may be eligible for. Your options include:

It’s worth noting that if this was your first tax offense in multiple years, you might be eligible for penalty abatement. Penalty abatement can significantly reduce your tax debt by shaving off the additional penalties levied against your tax accounts, such as the failure to pay and the failure to file a return.

Getting Current

A pre-requisite for any payment plan is to be up-to-date and current with each of your tax returns under some circumstances for at least the last six years. While the IRS can and does file substitute returns in your name, based on information they have collected, they typically will not agree to a payment plan if you haven’t been keeping up with your returns. If you are employed, you can significantly simplify the process by working with your employer and asking for print-outs of your previous Form W-2s. If you are self-employed, you may want to work with a CPA or a licensed tax professional to figure out your past returns and bookkeeping records.

Why Would I Need Representation?

Tax representation through a tax resolution firm may be necessary whenever you wish to appeal for an offer in compromise, appeal a decision to levy your accounts, appeal against a lien, or negotiate an installment agreement. It is easier to work with a professional than tackle the IRS’s demands alone, but it is often safer as well.

Offer in Compromise: How to Settle Your IRS Debt 

If you face a substantial tax debt without the means to pay it off, even in a few years’ worths of monthly installments, you may want to consider an offer in compromise (OIC). An offer in compromise is a process through which you can negotiate a lower total tax debt with the IRS. However, it isn’t guaranteed. There are strict eligibility rules and qualifications. A big part of qualifying involves being completely upfront about your financial situation, existing assets, real property, investments, vehicles, and sources of income. Ultimately, the IRS wants to ensure that you are paying just about as much as you can afford to without facing financial hardship before it will consider an offer in compromise. 

What Is an Offer in Compromise? 

An offer in compromise is one of the multiple payment options the IRS offers to taxpayers. It has tighter eligibility rules and a longer list of qualifications than the IRS’ other payment plans. Creating an offer in compromise requires two forms: Form 656 and Form 433-A (OIC) (or Form 433-B (OIC) for businesses). The former is the offer in compromise itself, alongside instructions on filling and filing it. At the same time, the latter is the collection Information Statement (CIS), consisting of the financial information the IRS requires to determine your eligibility.

The IRS verifies the information provided on a CIS and cross-references it with information returns obtained by banks and businesses before its deliberation. Once you’ve finished filling out the information needed, you must send it to the IRS alongside a non-refundable application fee of $205 and the initial payment of your proposed offer. The IRS expects you to calculate what you can offer to pay within a reasonable period and requires you to make the first payment alongside your application.

Even if it rejects your offer, the first payment sent alongside the application is non-refundable. Because it can take multiple weeks to deliberate an offer because tax debt grows through penalties and interest, and you have to send in an initial payment with each new offer (alongside the $205 fee). It’s generally a good idea to be sure about your offer in compromise before you go ahead and make one.

IRS Tax Resolution and Collection Actions

Why work so hard to settle your debt with the IRS? Because if you do not, the IRS may enforce collection actions against you and your tax account. IRS collection actions include federal tax liens and assets, property, and wage levies. A federal tax lien is a public notice informing creditors of the IRS’s superior claim on everything you own, freezing your ability to satisfy other debts or seek financing until you settle your debt with the government. In the past, this process would also leave a black mark on your credit score equivalent to bankruptcy – this has since changed, and credit agencies no longer report tax liens.

On the other hand, Levies are a more direct form of action. They involve taking what you own and selling it to satisfy your tax debt. While the IRS won’t kick you out of the family home, they can come to collect your car or all but empty your bank account. They can contact your employer to claim a portion of every paycheck until you pay your debt if you are employed. Liens and levies can be harsh. Payment plans, such as an offer in compromise, can avoid them. Furthermore, specific payment plans can even lead the IRS to release a lien or reverse a recent levy before your property is sold if the circumstances permit it.

Choosing a Payment Plan 

In addition to an offer of compromise, the IRS accepts payments in a few different ways:

What If You Don’t Qualify for an Offer in Compromise? 

If your offer of compromise was rejected, consider consulting a tax professional about drafting a better proposal or picking a better payment plan that suits your circumstances. The beauty of an offer in compromise lets you settle your tax debt for less than you owe. The caveat is that very few people qualify for an offer in compromise. While the IRS has been throwing taxpayers a bone by relaxing the requirements for an offer in compromise, it remains in the spirit and practice the last resort for taxpayers who lack the financial means to pay their total tax debt within a reasonable period.

That doesn’t mean you do not qualify for an offer in compromise. Depending on what you own and what you owe, you may be able to be eligible for an offer in compromise. You may still be able to get a reduced total tax debt via a partial payment plan if your debt is about to expire, or you could create a more realistic offer with the help of an experienced tax professional. At Rush Tax Resolution, we can help you quickly figure out the best way to deal with your tax debt.

IRS Payment Plans: How to Pay Back Tax Debt Over Time

Tax debt can cause significant stress, and dealing with it can be a very daunting process. Here's how to pay back tax debt with IRS payment plans.

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Tax debt is special in the most insidious way – it follows you everywhere, is almost impossible to get rid of, and can continue to grow at rates that would make most banks and financial institutions blush.

Dealing with your tax debt isn’t something you should ever put off until tomorrow, and it’s crucial to know that the sooner you commit to paying your debt, the less the IRS can do to coerce payment.

Now, we know that no one is ever stoked about seeing a notice from the IRS in their mailbox. But it’s important that you heed every single one, and pay attention to the dates. There is a system for how the IRS notifies and engages with taxpayers who are behind on their payments, and knowing when, how, and what you owe can help you get rid of your debt faster with IRS payment plans.

 

How Tax Debt Occurs

Maybe you made a mistake. Maybe the IRS made a mistake. At the end of the day, any time the IRS discovers that the information they received from banks and employers doesn’t match up, or if the return you filed yourself indicates that your estimated tax payments didn’t cover your entire tax liability for the year, they send in a bill for the overdue balance. It could be a few hundred dollars, or a debt of several thousand. The last thing you want to do is ignore that bill.

While the IRS automates most of the processes involved in catching and rectifying basic math errors and returns that don’t quite match up, there are still human auditors working behind their desks to process the information and make sense of the situation.

By getting in touch with a tax professional, you can work your way to an IRS agent and rectify the situation by explaining the missing numbers, or even pointing out that you did, in fact, qualify for that deduction.

If and when the IRS makes the mistake that costs you a tax debt, acting quickly and decisively can help you clear things up and get back on Uncle Sam’s good side.

But when the mistake was yours, or when an unfortunate set of circumstances led to missed deadlines and an unexpected tax debt, there are a few things you will have to know before you can set things straight.

 

Can I Pay Tax Debt Immediately?

Yes, provided you are up to date with your tax returns. One common source of unexpected tax debts is the missed return. Some people may have struggled with unemployment as a result of the current crisis – and they may have missed the chance to file their taxes, which is something many unemployed people must do as long as their gross income surpasses the IRS’s filing threshold.

Unfiled tax returns will flag the IRS and lead them to file a surrogate return for you, based on information returns provided by financial institutions and banks, as well as your previous tax returns. This leads to a debt and subsequent failure-to-file penalties, for five months or until your returns are sent in.

If you have a tax debt and aren’t up to date with your returns, you will not be able to negotiate an IRS payment plan to get your debt settled. If you’ve missed more than one return, it’s crucial to contact and speak to a tax professional. You may only need to send in returns for the last three to six years or recreate a return for every year you’ve missed since you’ve began missing returns, depending on your situation.

Once you’re in the clear with your basic paperwork, you can pay off your tax debt in a single payment via the IRS’s online portal. You can also write a check or payment directly to the IRS, with the instructions on the IRS’s webpage on payment plans.

If this was your first offense, and your circumstances allow it, you may be able to argue for penalty relief. This can significantly cut down on your total tax debt.

 

What If I Can’t Afford to Pay?

If your debt has accrued over time and grown into a substantial sum, then you might be better off trying to make multiple payments rather than a single payment.

There are two types of IRS payment plans for taxpayers unable to make a single direct transfer.

      1. The first is a short-term payment plan lasting no more than 180 days.
      2. The second is a monthly installment plan lasting longer than 180 days.

 

What If I Can’t Afford IRS Payment Plans?

You can end up paying the IRS for years, depending on what you can afford to pay per month, and the total size of your debt.

Before the Fresh Start Initiative lowered the bar for entry on alternative payment solutions, the IRS would require you to calculate whether you would be able to pay off your total debt through monthly payments before your debt expires before agreeing to reduce your total debt.

Nowadays, the IRS allows you to argue for an offer in compromise if you’re unable to pay off your debt within as few as two years.

However, making a compelling offer that the IRS will accept is still tricky, and it can take weeks for the IRS to deliberate your offer – while your debt continues to grow.

If you cannot afford to cover your debt through IRS payment plans or installment agreements, consider going through a tax professional to create an offer in compromise the IRS will accept.

 

What If I’m Completely Broke?

It is unethical to coerce someone to pay their tax debt if they are going through financial hardship. That is why the IRS offers taxpayers the option to declare themselves as currently not collectible. Doing so will temporarily halt all collection actions by the IRS, including liens and levies, until your financial situation improves.

 

What If I Refuse to Pay?

The IRS has multiple means of coercing payment and works with a select few debt collection companies to contact and talk to taxpayers about their debt.

Refusal to pay is technically illegal, but aside from the threat of a criminal charge, the IRS often uses government liens to pressure taxpayers by reducing their ability to seek financing or liquidate their assets without first satisfying their debt, and they can ultimately start levying accounts, assets, and even wages to cover a taxpayer’s tax liability.

 

Why You Need Professional Tax Help

You can’t get rid of tax debt by declaring bankruptcy, or by trying to hide for a decade. Getting it over with by negotiating and setting up IRS payment plans for the best possible deal is ultimately the quickest and most painless way to handle your tax debt.

However, working with the IRS can be confusing and difficult, and there are a lot of forms to fill and questions to answer on your way to total financial freedom from the IRS. Get in touch with us at Rush Tax Resolution for a free consultation, and to get a better grasp of your options.

Understanding Small Business Tax Deductions and Relief Options for 2022 

Small business tax deductions can help your business continue to run smoothly. Here's what to know about relief options for your small business.

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The IRS defines small businesses – within the context of tax relief and deduction options – as any business with assets under $10 million. These businesses, including self-employed professionals and independent contractors, can avail of certain tax credits and deductions to help minimize their tax liability and stay afloat during the COVID pandemic. Let's dive into the current tax relief programs and general small business tax deduction options for the new year.

Basic Business Tax Deductions and Tax Credits

Tax credits are money the IRS lets you omit from your tax liability. When a tax credit is described as refundable, the IRS lets you withdraw the remainder of as cash if your tax liability is more than covered. Most tax credits require businesses to meet certain eligibility requirements to avail for a tax credit.

The IRS provides multiple different forms for small business tax credits, from ones designed to provide special benefits to carbon dioxide sequestration programs to a tax credit for paid family and medical leave, in addition to basic tax deductions.

Tax deductions for businesses essentially allow companies to minimize their tax liability by writing off eligible business expenses, from office supplies to fuel.

Not all business expenses can be deducted. Capital expenses generally cannot be deducted, for example, unless the startup of a business fails (in which case they become capital losses). These include assets that continue to generate value for the business, such as buildings, equipment, or vehicles. In this case, the business hasn't really lost any value – it simply moved it around, from liquid cash to an asset.

Knowing what your business can and cannot deduct can require great attention to detail and a thorough understanding of federal and state tax laws. Be sure to consult a professional when dealing with tax credits and deductions.

Coronavirus-Related Tax Relief for Small Businesses

Following the beginning of the coronavirus crisis, the government and US Treasury rolled out multiple different relief programs aimed to aid American workers, families, and small businesses, providing economic relief to keep companies and households afloat during the harshest and hardest months of the crisis.

Most of these tax relief programs ended in early to late 2021, and very few are slated to be extended into 2022, if at all.

For small businesses, in particular, coronavirus-related tax relief and financial assistance programs took on the form of an

Among these four, the first two are tax-related, in that they provide refundable tax credits, which can be used to minimize a business's tax liability and even provide a cash infusion if withdrawn.

Employee Retention Tax Credit

The Employee Retention Tax Credit began in 2020 as a refundable tax credit equal to $5,000 per employee, or 50 percent of eligible wages paid, whichever was less. Eligible businesses that took out PPP loans are also allowed to claim an Employee Retention Tax Credit for 2020, provided they do not use the eligible wages calculated for the tax credit for their PPP loan forgiveness application.

In 2021, the Employee Retention Tax Credit was extended – first into the first quarter of the year and eventually throughout the entire fiscal year. This time, employees received a tax refund equal to the lower of either $7,000 per employee or 50 percent of eligible wages paid. Eligibility to receive an Employee Retention Tax Credit in 2021 was lowered to a 20 percent decline in gross receipts during a single quarter compared to 2019.

The Employee Retention Tax Credit has not been extended into 2022, however eligible businesses can still claim their tax credit retroactively, provided they file their amended payroll tax forms.

Paid Sick and Family Leave Tax Credit

The other major coronavirus-related tax credit was the Paid Sick and Family Leave Tax Credit, or the Paid Leave Credit.

This tax credit was provided to offset the requirement that businesses with 500 or fewer employees were required to provide paid sick and family leave for employees struggling with the results of the pandemic. It initially took on the form of wages paid over an 80-hour paid leave per employee, either:

In addition, employers were obligated to provide employees with ten weeks of paid leave to take care of their children while school or child care was unavailable due to COVID, receiving an incentive tax credit equal to two-thirds of their employee's wages, capped at $200 per day per employee, or a total of $10,000 per employee.

The tax credit was extended throughout 2021, but the requirement to provide paid leave was not. This means only businesses that continued to provide paid leave to their employees for COVID-related obligations were eligible for a tax credit. If you have not received your tax credit, you can file amended payroll tax forms to claim the tax credit and receive a refund for your business.

The Paid Leave Credit is not being extended into 2022.

Child Tax Credit

While not strictly relevant to small businesses tax deductions, the Child Tax Credit was relevant to millions of self-employed and working Americans with dependents, as it was slated to be extended into 2022 – remaining one of the only coronavirus tax relief offerings that might have made it into the new year.

As many as 35 million families across the US relied on the tax credit, with many using it for school supplies and childcare. With cases surging and a new variant looming on the horizon, news of Congress' inability to extend the program has caused many lawmakers to try and figure out state-level solutions instead to help families retain an important safety net ahead of yet another wave of economic uncertainty. So far, seven states have their own implemented Child Tax Credit, with another nine states having seen proposals for one in the past two years.

While small business owners with dependents and other families might not see an expansion of the Child Tax Credit in 2022 – the jury is still out on whether Congress will be able to vote in a revised version of the Build Back Better bill next year – there are still other deductions and tax credits to take advantage of, both for individual taxpayers and small businesses working to survive the ongoing crisis.

Other Important Tax Relief Tips

Running a small business is a monumental task. Most small business owners are struggling to make ends meet, nowadays more than ever.

There's payroll to worry about, increasing fuel costs, supplier rates, and unprecedented supply chain issues. Everything from lumber to server space is becoming more expensive, and there are a million balls to keep juggling in the air.

Why let one more worry pile up and cost you precious capital? Get in touch with a tax professional to help you minimize your business's tax liability, from providing sensible and actionable tax credit information to tax return filing services down to advice on restructuring. Let Rush Tax Resolution help. Get in touch with us today and find out more.