Guide to IRS Tax Forgiveness (with FAQ)

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The IRS is very forgiving, but getting in touch with them can be difficult. IRS tax forgiveness refers to the act of tax delinquencies being offset by the government.

You may see your delinquent accounts canceled, credit karma deletions, or other impacts if you’ve had an issue with your taxes. This article will go over how to resolve delinquent taxes and what may happen if you have unresolved issues with the IRS.

Use this guide to figure out what the IRS does and does not forgive.

What is IRS tax forgiveness?

Tax forgiveness is when you do not have to pay back taxes you owe (usually because of financial issues such as bankruptcy, foreclosure, or unemployment).

The IRS will sometimes agree to forgive your tax debt in part or whole, depending on the circumstances.

Why would I need IRS tax forgiveness?

You may require tax forgiveness if you are unable to pay the full amount of taxes owed.

This could be for a variety of reasons, including but not limited to high medical bills, high child care expenses, unemployment, foreclosure, or bankruptcy. Note that student loan debt cannot normally be forgiven by the IRS.

Does the IRS forgive income tax debt?

Unfortunately no. However, the IRS is often willing to lower your penalty if you are already working on paying back taxes.

You can also agree with them to stop interest payments on the debt, but this usually only applies in cases of extreme financial hardship.

What is ‘IRS tax forgiveness’?

Sometimes it’s okay for the IRS to forgive (lower) your penalties for late payment or non-payment of taxes, but there are limits.

For example, if you owe $1000 in taxes and your penalty totaled up to $150, then they will only lower that penalty down to $50.

The exception here is if you missed payments due to a natural disaster, in which case they may reduce the penalty down to 0.

What is ‘IRS tax forgiveness for teachers’?

Sometimes teachers can get their federal student loans forgiven fully or partially by teaching in a designated high-need field and low-income school for five consecutive years. In order to qualify, you must have been employed at an eligible school for five consecutive years after the 1997–98 school year.

You must have been a highly qualified teacher during that time as well, meaning that you were certified in your subject area and had proven knowledge in it.

If you only qualify for partial relief of your debt, seek out a consolidation loan from a private lender if possible, since this will make it easier to afford your monthly loan payments.

What is ‘IRS tax forgiveness for nurses’?

Sometimes nurses can get their federal student loans forgiven fully or partially by working in an underserved area (health professional shortage) for five consecutive years.

In order to qualify, you must have worked as a nurse at an eligible critical-shortage facility for five straight years after the 2003–2004 school year.

You should also be employed full-time during this time and remain employed at the same location throughout the rest of this period (unless there are extenuating circumstances, such as maternity leave).

If you only qualify for partial relief of your debt, seek out a consolidation loan from a private lender if possible since this will make it easier to afford your monthly loan payments.

What is ‘IRS tax forgiveness for teachers and nurses?

The federal government has deemed that the career paths of nursing and teaching are both essential to society, and they provide incentives like debt forgiveness in order to recruit qualified individuals into these important positions. These programs are very popular, especially with recent college graduates,

who often face high amounts of debt when entering the job market. However, there is a maximum amount of loans that can be forgiven (typically $17,500).

You can consolidate private loans if you need more than this amount forgiven in order to make things easier on yourself financially.

How to Apply for IRS Tax Forgiveness?

If you know for a fact that you will not be able to pay your tax debt within five years, fill out this application.

Keep in mind that the IRS reserves the right to review your financial situation before approving or denying you. You should also check with your state since they may have different guidelines for paying back taxes.

If you are experiencing extreme financial hardship, consider seeking professional help to ease the burden of repayment.

Can I Receive Tax Forgiveness by Filing Bankruptcy?

No, student loan debt cannot normally be discharged in bankruptcy proceedings, so it is very unlikely that the IRS will forgive any part of it either.

Your best option here is consolidating your loans and finding a payment plan which can work better with your financial situation.

You can choose from a variety of repayment plans with different terms, so be sure you find the one which works best for you.

How Can I Lower My Payments?

You may be eligible for income-sensitive repayment plans if your monthly income is low enough to qualify. Income-contingent repayment automatically calculates your monthly payments based on what you earn, so this might even lower the total amount of interest that accrues over time! 

If these plans do not work out well for you financially, consider deferring your loans instead. This will allow you to postpone making payments for a certain amount of time (no interest accrues on subsidized loans during this period). However, be aware that this can cause serious financial damage if you do it too frequently or the total amount of interest over time is more than what you would have paid if you had just repaid your debt on time.

If I Have Private Loans, Can I Still Apply for Tax Forgiveness?

You can consolidate your private student loan debt with federal programs in order to take advantage of IRS tax relief. This tutorial explains how to apply electronically.

What Are My Options If I Only Qualify for Partial Tax Forgiveness?

If you only qualify for partial relief of your debt, seek out a consolidation loan from a private lender if possible, since this will make it easier to afford your monthly loan payments.

IRS Tax Forgiveness Program: FAQ

How much debt can be forgiven? 

The maximum amount of financial relief with federal student loans is $17,500 under the IRS tax forgiveness program.

Does the teacher job requirement apply to all states? 

No, some programs like those in California and Texas require you to work as an educator for at least five years, while others only demand that it’s three years (or less).

What is considered full-time employment?

You should be employed at least 30 hours per week with one employer for the majority of your time teaching (ex: 8:00 AM – 4:00 PM Monday through Friday).

If I make payments for ten years and receive tax forgiveness afterward, is the forgiven amount taxable? 

No, your remaining debt will be eliminated and no taxes will be owed on it.

This is a guide to IRS tax forgiveness for private student loan debts (such as Stafford loans).

Types of IRS Tax Forgiveness

There are three types of IRS tax relief:

  1. complete (total) forgiveness,
  2. partial (partial) forgiveness, and
  3. deferral.

Make sure you indicate which type of relief applies in your situation. 

Administered by the Internal Revenue Service US Department of the Treasury, there are two ways to apply for private student loan debt relief. One is by filing amended tax return forms with the necessary information. 

The other is by consolidating your debt into a federal program (if you can borrow through one, typically only if you don’t have an outstanding balance already).

Both methods result in total loan forgiveness.

Another option for private student loan borrowers is to go through the 10/10 rule which lets some lenders voluntarily reduce some of your debt. However, this applies more so to people with Perkins loans than Stafford loans.


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