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HMRC stands for Her Majesty’s Revenue and Customs and is responsible for the collection of taxes from the citizens of the UK. Whereas, IRS Tax Debt Help or Internal Revenue Service collects tax and enforce tax law for the US citizen.

Although there are similarities between the tax system of both countries like in payroll and tax returns for every financial year. However, there are more layers of taxes and laws that are considered under help with irs tax debt than that of HMRC. Thus, the collection of taxes and reporting is more straightforward and easy in Britain than in America.

Similarly, it also applies to your debt that you owe to the respective countries. There are different programs under HMRC and help with irs tax debt that you can use to pay off your priority debt. But, each country has strict laws which are applied if you fail to pay what you owe to the government within the stipulated time.

IRS Tax Debt Help Vs HMRC Tax Debt Programs

If you need IRS Tax Debt Help with tax debt then both the countries have programs that can help you with it. The UK collects income tax on income exceeding £12,500 at an interest rate of 20%, 40% and 45%. 

Whereas the US collects tax on income above $12,200 which includes mortgage, student loan, and other charitable contributions, etc. Tax rates start from 10%, 15%, 25%, 28%, 33%, 35% and finally up to 39.6% for taxpayers with income exceeding $418,400.

The tax system is complex and many people from both the countries fall under huge debt when they are unable to pay it risking their property and personal savings. People from respective countries suffering from a debt problem due to taxes can use the relief option provided by help with irs tax debt and HMRC.

IRS Tax Debt Relief Programs

The key to reducing stress is to pay your debt as quickly as you can. Most people get stressed when they get government notice. If you are unable to pay your taxes in full the first thing you should do is contact the IRS and come up with a possible solution that is offered by them.

  1. Payment Plans

    IRS provides an option to set-up short or long term payments plans. However, any unpaid dues will come with penalties and interest until the final payment is done.

    The short term plan provides you 120 days to pay your tax in full. You can pay the tax you owe by automatic withdrawals from your current account or by money order, debit/credit card, and check. 

    You can apply for this payment plan online/phone or by in-person. The setup cost for this plan with the IRS is $0. And the maximum amount you can owe to the government while applying for this payment plan is $100,000 combined (inclusive of Tax, Penalties and Interest).

    The long term plan provides you more than 120 days to pay off the taxes you owe to the government. The maximum amount that you can owe to the government in this plan is $50,000 combined.

    However, unlike the short term plan, setting up a long term plan does cost some money. If you are paying through automatic withdrawals then a charge of $31 is applied and $107 if you apply by phone, mail or in-person. 

    Although the IRS can decide to waive off the charged fee if you fall under the low-income category. Other than this if you try to pay through any alternative method then the fee charged by IRS can be much higher.

  2. Compromise Offer

    You can get help with tax debt through what’s called an “Offer in compromise”. If you have been offered a compromise then you can settle your taxes for a lot less than what you actually owe to the IRS.

    Although it’s not easy to get the IRS to sign an offer in a compromise deal. The acceptance ratio is fewer than half the request person in debt files. To determine whether you are qualified for this deal, the IRS checks your ability to pay, the income that you generate and the expenses that you have. Also the number of assets that you own.

    To determine you can use the free pre-qualifier online tool to note whether this can be an option for you or not.

  3. Request For Not Collectible Status

    The IRS tax debt help program can put your account on what’s called ‘Currently Not Collectible” status. This will put your payable tax debt on hold. The IRS can give you this status only after you prove that neither can you pay your taxes nor your living expenses.

    Although you need to prove your financial status by filling a Collection Information Statement issued by the IRS. Also, in that form, you need to provide information about your monthly income and expenses to the IRS.

    This is a temporary request and the IRS may review your annual income to check whether your financial condition has improved. Also, Currently Not Collectible doesn’t make your tax debt disappear. If the IRS wants they can still charge the tax that you owe to them.

HMRC Tax Debt Relief Programs

Any priority debts like Income-tax (PAYE), NI, or VAT arrears to Her Majesty’s Revenue and Customs (HMRC) then it should be taken care off as soon as possible. If you are unable to pay your taxes then you should contact HMRC for any debt relief option available.

  1. Debt Relief Order (DRO)

    If you owe HMRC less than £20,000 and owe few assets then you may apply for DRO. This is only applicable if you don’t have any spare income or don’t own a home.

    The creditors cannot recover any money without the court orders once you file for a DRO. Also, you are usually free from your debts for a period of 12 months. A DRO can only be filled by an authorised debt adviser and has a receiver’s fee of £90.

    You are eligible to file a DRO if you haven’t filed it in the last 6 months and have spare income less than £50. Along with that within the last 3 years, you must have lived or worked in England and Wales. Also, you must have assets worth less than £1000.

    There are some restrictions that you need to follow once you file for a DRO with the HMRC, such as:

    • You cannot borrow any money more than £500  without informing the HMRC.
    • Also during the terms of DRO, you cannot act as the director of a company. Further, you cannot create, manage or promote it without permission.
    • Any business that you manage must have the knowledge about the existing DRO against you. This applies even when you are opening a bank account.

    Getting a DRO is a serious step and has a lot of consequences on your future credit. It is advisable to get the requisite advice before you apply for a Debt Relief Order.

  2. Individual Voluntary Arrangements (IVA)

    IVA is an arrangement with your creditors and HMRC to pay your debts over a specific period of time. Usually, after you file an IVA, the repay debt is less than what you actually owe. You make regular payments to an insolvency practitioner who then divides your money and distributes between your lenders.

    Although to get an IVA Debt Management, it must be approved by the creditors that owe at least 75% of your debt.

    If you owe any amount to HMRC then it has the power to block your IVA alone. Also to be eligible for an IVA, you must have sufficient ongoing income to pay the relatively high repayments to creditors and insolvency practitioners. 

    There’s usually a setup cost for it depending on the insolvency practitioner. Also, they can cancel your IVA anytime if you don’t make the proper repayments and make you bankrupt. This usually stays on your record for more than 5 years and it is added to the Individual Insolvency Register.

  3. Special Relief Case

    You can opt for special relief if it includes estimated amounts of tax and is too late to file for a tax return. HMRC has the power to make you bankrupt legally. But, if you provide acceptable evidence and reasons for your unpaid tax then they may not pursue its legal right and term it as unconscionable.

    Unconscionable means unreasonably excessive and is a very strict test to pass. HMRC has published guidelines to circumstances that they will accept the relief. (Although they reject most of the proposal that applies for special relief). 

    Here are a few specific conditions that need to be fulfilled in order to obtain the Special Relief:

    1. The individual filing for Special Relief must have tax affairs up-to-date, or an acceptable arrangement has been made to make them up-to-date.
    2. There should be no claim of Special Relief before it. (Even if the request was rejected before).
    3. Also, HMRC has the right to recover any estimated tax or to reject any refund on the paid tax.

    Along with that taxpayers need to declare all the other requirements listed in the Special Relief page in the government of UK official site.

What are the Acceptable and Unacceptable Reasons for Special Relief?

Although you satisfy all the conditions, there is a strict filter from the HMRC office on what reasons you plea to Special Relief is accepted. Here are the reasons:

  1. HMRC can consider your request if you are suffering from any temporary or a longtime illness. Physical and mental illness are both taken into consideration.
  2. If you were not informed about the debt situation by HMRC due to technical or factors outside your control.
  3. Someone who is unable to pay any debt, HMRC might consider their request

Unacceptable Reason for Special Relief

There is a list of special cases that may be considered for rejecting your Special Relief request and is not accepted by HMRC. Here are the situation and condition for which your request may be rejected:

  1. If you have registered as self-employed but never traded.
  2. Construction industry who neither respond to HMRC or file any tax returns.
  3. Someone who fled the country and moved abroad leaving their outstanding debt behind and not responding to HMRC.

These are some basic situations where your plea might get rejected although there are other various reasons where HMRC can decide not to grant you Special Relief.

When a claim of Special Relief is made all the tax return for the relevant years and also the other outstanding years must be submitted before HMRC.

What Happens if You Don’t Pay or File IRS and HMRC Debt?

If you don’t file or pay your debt on time then there can be different penalties levied against you. The penalties are different for IRS and HMRC. 

  1. IRS Penalties

    Every taxpayer’s situation is different and the IRS does consider if someone is unable to pay their debt money. Even after that if you are unable to pay your debt., here’s what gonna happens:

    • If you failed to file a tax return, then you may face a failure to file a penalty. The penalty for it is 5% of your total unpaid taxes. It applies to every month you file your tax return late. Additionally, if your return is due for more than 60 days then a minimum of $135 or 100% of the taxes you owe whichever is minimum.
    • If you file your tax returns but don’t pay, the IRS can/will charge failure to pay penalty. The penalty charge is only 0.5% of your total unpaid taxes. Interest is charged on your unpaid taxes which is equivalent to the federal short term rate. Adding to all these, an extra 3 per cent over it.

    If you continuously ignore the tax debt due to the IRS then you can face some serious troubles. This might include seizing your property to revoke your passport. Also, the IRS can make you forfeit your refund and file charges for tax evasion which is a federal offence.

  2. HMRC Penalties

    Similarly, like the IRC if you don’t speak to any HMRC officials regarding your tax problems and continue to evade it. then there are some serious penalties that can be charged against you. 

    Here are the penalties that you may be charged if you failed to file or pay your tax returns:

    1. HMRC will charge 5% interest if you fail to make your payment within 30 days. If it continues then again the interest would be charged at 6th and 12 months.
    2. It can levy enforcement action against you like taking hold of your possessions (includes vehicles).
    3. Also, HMRC can take money directly from your bank if your debt is more than £1000.
    4. Furthermore, they can take court action against you and make you bankrupt.

    However, HMRC can take whichever action they find fit against you that they think will work most likely. The deciding factor for that maybe your debt and relation with the HMRC.

    If you are having IRS Tax Debt Help problem then it’s better to take suggestions from a national debtlines adviser that can help with your tax returns to IRS and HMRC.


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