Tax relief is often achieved through new rules that reduce how much you owe in taxes, such as by providing a tax exemption or a tax credit. It may also be done through rules that reduce the difficulty of filing or paying taxes, including by extending filing and payment deadlines. Tax relief can also refer to programs that assist you in managing and resolving back tax debts that you owe. The Internal Revenue Service (IRS) provides these tax relief programs to taxpayers, such as via an offer-in-compromise. The IRS often provides federal tax relief during events like hurricanes or wildfires. Sometimes, IRS tax relief programs don’t require taxpayers to apply for the relief, while in other cases, an application may be required.
Examples of Tax Relief
Tax relief can come in many forms and for various reasons. Below are some examples of changes in tax laws designed to help people and businesses.
Natural Disasters
Disaster declarations from the Federal Emergency Management Administration (FEMA) can result in tax relief. These policy decisions may or may not be accompanied by federal laws. In early 2022, the IRS announced tax relief related to wildfires and winds that occurred in Colorado. Some of the specifics of this tax relief measure included extending individual and business tax filing and payment deadlines. Other measures included allowances for taxpayers to deduct property losses if they weren’t covered by insurance.
Federal and Local Tax Breaks
Some tax relief programs are designed to be a change to tax policy. The American Taxpayer Relief Act of 2012 made many federal income-tax reductions permanent. Other types of tax relief occur at the state or local levels. Senior citizens in many areas are eligible for property-tax reductions, which can vary based on income.
The COVID-19 Pandemic
Another example of tax relief applies to measures taken in response to the COVID-19 pandemic. The passage of the Tax Relief Act of 2020 provided tax relief by making direct stimulus payments to individuals. These stimulus payments were structured as refundable tax credits. Many taxpayers didn’t have to do anything to get the relief since the IRS instituted them automatically. However, the IRS required some taxpayers who hadn’t filed a tax return in the previous two years to file a return to get the relief.
What Tax Relief Mean for Individual Taxpayers
Knowing about both federal and local tax relief options can help you legally reduce tax liability. However, there can be many nuances to tax relief rules, and it can be hard to stay on top of everything. To keep track of all the relief options, you may prefer to work with a tax professional. They can help you find and use tax relief measures, such as changing your filing timeline or claiming additional deductions. Most tax preparation software will also be updated to include current forms of tax relief available to you. However, tax relief might include extending tax-filing deadlines during a natural disaster or a stimulus check paid to taxpayers experiencing economic hardship.
