Tax relief is basically the elimination or reduction of a liability from paying a tax to the government, in exchange for a prescribed penalty. According to the tax lawyers in Arizona, the concept of tax relief is often confused with tax settlement. While tax settlement refers to the process in which an agreement is made between tax authorities and taxpayers, tax relief is a much narrower field of law. Tax relief is defined as a financial situation whereby an obligation to pay tax is waived. This may be in the form of immediate tax relief, in the form of extending the time period for which you have to pay taxes or in the form of paying tax amounts that are smaller than originally required.
Tax relief is available for taxpayers of all income levels. However, there are many citizens who fall into the lower tax brackets. This group of taxpayers may find themselves financially strained when their tax debt exceeds their regular monthly income. Expert tax relief companies can help such taxpayers deal with the problem of tax debt through professional negotiations with the IRS. These tax relief companies represent taxpayers on a regular basis and offer them various options to reduce or eliminate their tax debt.
Another way of getting out of the situation is through compromise, also known as an offer in compromise. Compromise agreements between tax agencies allow them to settle tax debts without forcing taxpayers to pay the full amount. The tax resolution company collects money from taxpayers so that they can pay the IRS. A percentage of the money collected goes to the taxpayer. An offer in compromise agreement is normally signed by both tax agencies and is used as a method to settle tax debts.
Another tax relief option available to taxpayers is a tax credit. Tax credits are reductions provided to individuals and businesses for certain expenses. For instance, a business that purchases a new machine will be able to claim a tax credit. Similarly, an employee who quits before the expiry of his tax relief can claim a tax relief. The taxpayer and his/her dependents may also receive tax credits for the cost of child care and college education. Tax credits are available for the purchase of health insurance, commuting expenses, home improvement and other items deemed necessary by the taxpayer.
A tax deduction is another tax relief option that enables taxpayers to claim deductions. There are several types of deductions available under the tax relief schemes offered by different tax agencies. Some common deductions are those for charitable donations, medical expenses, state and local taxes paid, mortgage interest, charitable settlements and repairs, home and car repairs, estate taxes paid and income tax. Taxpayers can also claim deductions for charitable contributions made to a charity and interest paid on mortgage debt.
Tax relief helps taxpayers meet their financial obligations and avoid paying too high an amount as tax penalties. The tax laws are amended frequently and the latest changes are incorporated in federal tax returns for filing purposes. Hence, taxpayers are advised to check the latest federal tax laws before filing their income tax returns.