Seeking tax relief is no easy task, given the degree to which tax law can seem deliberately obtuse. Every step of the process, from tax preparation to filing the paperwork to filing an appeal, can be mired in red tape and feel overwhelming. Having an experienced professional at your side to cut through it all – and help you save money by reducing your tax liability in the process – can mean the difference between dreading Tax Day and treating it like any other. Before you can choose the right tax relief specialist for your circumstances, it pays to know what federal tax relief looks like – and what your options might be.
Understanding Tax Relief
Tax relief is a catch-all term for reducing your existing or future tax liability and may even be applied to ongoing tax problems, such as an outstanding tax debt. Seeking tax relief may involve:
- Optimizing your deductions;
- Using tax credits, you unknowingly qualify for;
- Attempting to rectify an error and eliminate your debt before your penalty grows, or better yet;
- Seeking penalty abatement.
Tax professionals who may help you with tax relief include tax attorneys, enrolled agents, CPAs specializing in taxes, and credentialed tax preparers. In addition to providing solutions for your immediate tax needs, the main advantages of seeking professional tax relief help include a better understanding of the tax code (and how it might benefit you) and saving you both time and money in the long term.
Navigating IRS Deductions, Exemptions, Credits, and Refunds
There’s a fine line between tax avoidance and tax evasion. The first step of tax relief is preparation. Professional tax preparers help your tax account minimize liability without evading your taxes. You can avoid tax liabilities that do not apply to your tax account or be more efficient with how you itemize your deductions. Tax evasion, however, means illegally skirting your responsibilities as a taxpayer and may be met with felony charges. A tax preparer’s job is to ensure you are always on the right side of the tax code while keeping you from overpaying taxes. In general, you can do this by:
- Switching from itemized deductions to a standard deduction, or vice versa;
- Applying for tax credits you might not know you had;
- Making use of your tax refunds;
- Optimizing your estimated tax payments to the IRS (avoiding a hefty bill at the end of the year while keeping more money in your pocket);
- Refreshing your estate plan and looking at how certain financial decisions may help you minimize your tax liability;
- Restructuring your business or corporation;
- And finally, learning how to navigate the IRS’s payment plans and options for penalty abatement in the event of unexpected tax debt.
First, deductions. The Tax Cuts and Jobs Act of 2017 made numerous changes to our taxes, including significant changes to deductions, exemptions, and tax credits. For many taxpayers, the most significant change is a massively increased standard deduction and the personal exemption elimination. In 2022, the standard deduction is $12,950 for individual filers – contrasted to the standard deduction of 2015, which was $6,300. Meanwhile, the Tax Cuts and Jobs Act eliminated several key itemized deductions. As many as 87 percent of filers chose the standard deduction over itemizing in 2018. This means that many taxpayers who were better off itemizing before 2017 may be better served picking the standard deduction instead.
Many taxpayers who default to the standard deduction, to begin with, receive a more significant tax cut. Tax exemptions are tax deductions in limiting the amount of taxable income claimed on your tax returns. However, taxpayers cannot claim a personal exemption in the tax years between 2018 and 2025. Certain tax credits, to compensate, were also increased. The child tax credit was doubled from a base of $1,000 to $2,000 and again to $3,000 in 2021 for qualifying parents (with children under 17). Income thresholds for the child tax credit were $200,000 in 2021 and $400,000 for couples filing jointly. Other noteworthy tax credits to keep in mind include:
- Earned Income Tax Credit (EITC) – helps lower-wage earners keep more of their paycheck.
- American Opportunity Tax Credit (AOTC) – reimburses taxpayers up to $2,500 for qualified education expenses per year.
- Premium Tax Credit (PTC) – allows eligible households to pay the premiums associated with health insurance acquired on the ACA Health Insurance Marketplace.
Keeping an eye out for significant tax changes, such as those introduced by the Tax Cuts and Jobs Act, can help you avoid being sidelined when Tax Day rolls around. Professional tax relief can help you make the most of these changes and minimize your annual tax bill.
Avoiding Penalties and Other Costs
If you find yourself in a situation where the IRS is making calls and sending you notices about your outstanding debt to the government, a little professional help can go a long way. Tax debt is a serious issue, and on top of being a powerful creditor, the federal government also charges hefty interest rates and stacking penalties. A tax relief specialist can help:
- Minimize your interest rates;
- Get you an installment agreement or payment plan that best suits your circumstances;
- Lessen your penalties;
- And even negotiate a lower debt.
Specific agreements with the IRS, such as a partial payment plan, or an offer in compromise, reduce the total debt owed in cases where a taxpayer’s financial circumstances do not allow for full payment within a reasonable timeframe. However, most of these applications for reduced debt are rejected. You may need an experienced professional’s help to draft an offer with a higher likelihood of acceptance.
Choosing the Right Tax Relief Specialist
Choosing the right tax relief specialist is as much a matter of professionalism and reputation as it is a matter of trust. Your go-to tax person will be someone you will need to trust with every detail of your finances and someone you can count on to help you navigate and understand your yearly tax obligations. Take time to meet with several professionals before settling on your final choice.