IRS Tax Hardship Rules

Truck driver tax debt is common, and fixable. Learn why it happens and how to reduce IRS back taxes the right way.

The passage of the One Big Beautiful Bill Act (OBBBA) has reshaped the tax landscape in a big way. Many tax cuts that were set to expire at the end of 2025 are now permanent, and several new planning opportunities have opened up. With the year quickly coming to a close, now is the ideal time to review your tax situation and see what steps you can take to reduce your 2025 tax bill. Before making any moves, work with your professional advisors to estimate what you’ll owe this year and identify which strategies best fit your situation. The earlier you begin, the more flexibility you’ll have to put these plans in motion before December 31. 1. Establish Your Tax Baseline Start by having your tax advisor prepare a pro forma 2025 tax return. This gives you a clear picture of where you stand—your projected income, deductions, and how different decisions may affect your final tax bill. If you're working with a financial team, request a year-to-date tax summary of your investment accounts. With this snapshot, you’ll have a solid foundation for determining which strategies are worth implementing before year-end. 2. Evaluate These Tax-Smart Strategies Harvest Tax Losses Markets have generally performed well this year, so you may be sitting on more taxable gains than expected. Tax-loss harvesting can help offset these gains by selling investments at a loss before year-end. If you want to repurchase the same investment, be sure to avoid the wash sale rule , which disallows a loss if you buy a substantially identical security within 30 days before or after the sale. One workaround is to double up —buy more now, wait 30+ days, then sell the original losing position. Important date: November 28, 2025 (the day after Thanksgiving) is the final day to sell at a loss and have it count for the 2025 tax year. Loss harvesting isn’t just a year-end task. Even in strong markets, individual positions may decline, creating opportunities throughout the year. Maximize Charitable Contribution Deductions If you plan to make charitable gifts, timing matters. Transfers of stock or other assets can take time to complete, so check with your financial institutions to ensure the donation is finalized before December 31. Because OBBBA imposes new charitable deduction limitations starting in 2026 , it may be advantageous to front-load charitable giving in 2025 . Beginning in 2026: Itemized charitable deductions are reduced by 0.5% of AGI Total itemized deductions for taxpayers in the 37% bracket are capped at 35% of AGI For high-income taxpayers, that may make a 2025 donation more valuable than the same gift in 2026. If you’re undecided about which charity to support, consider a donor-advised fund (DAF) . You receive the deduction immediately, but you can distribute the funds to charities later. Optimize Estimated Tax Payments Many high-income taxpayers must make quarterly estimated tax payments to avoid underpayment penalties. You can meet the requirements using the “lesser of” safe harbor : 110% of your prior year’s tax liability, or 90% of your current year’s projected tax liability If you expect your 2025 taxes to be significantly higher than in 2024, it may be strategic to base your estimates on 2024’s lower liability and invest the difference in short-term, principal-protected fixed-income investments. This lets you earn some return on money you’ll eventually pay in taxes. 3. Optimize Retirement, Compensation, and Benefits Max Out Retirement Contributions For 2025, the contribution limits are: IRAs: $7,000 (or $8,000 if age 50+) 401(k)/403(b): $23,500 $31,000 for those age 50+ $34,750 for those turning age 60–63 in 2025 If you’re eligible, consider whether a Roth conversion makes sense—especially if you expect higher income tax rates in the future and can pay the conversion tax using funds outside the IRA. Take Required Minimum Distributions (RMDs) Anyone age 73 or older generally must take RMDs by December 31 each year. If charity is part of your plan, a qualified charitable distribution (QCD) from your IRA can satisfy part or all of your RMD. This strategy, however, may not always be the most tax-efficient depending on your broader financial picture. For inherited IRAs where the owner died after 2019, new regulations beginning in 2025 require many beneficiaries to take annual distributions over a 10-year period , with the remaining balance distributed in year 10. The rules are complex, so work closely with your tax advisor. Consider Deferring Compensation If your employer offers a deferred compensation plan, election deadlines typically fall before December 31, 2025 for 2026 income deferrals. Deferring compensation delays income taxation until you receive the funds, potentially allowing you to take advantage of future lower tax rates. However, deferred compensation is subject to employer credit risk, so weigh the pros and cons carefully. Review Stock Options Executives with stock options may want to consider exercising some in 2025. Strong candidates for exercise include options that are: Deep in the money On high-dividend stocks Close to expiration Your advisory team can prepare an options breakeven analysis to help you decide. 4. Make Tax-Efficient Gifts to Family Use Lifetime Exclusion While It Lasts The current gift and estate tax exclusion is: $13.99 million per individual $27.98 million per married couple These increase to $15 million ($30 million for couples) in 2026 under OBBBA. If you anticipate a taxable estate and have unused exemption, making large gifts now may help lock in additional tax-free transfer capacity. Take Advantage of the Annual Gift Exclusion For 2025, you may give: $19,000 per recipient (individual) $38,000 per recipient (married couple electing to split gifts) This exclusion is use-it-or-lose-it —unused amounts cannot be carried over to future years. Many families use this strategy to fund 529 education plans , where earnings grow tax-free when used for qualified education expenses. 5. Work With Tax Professionals to Finalize Your Plan Year-end tax planning is full of opportunities—but also details, deadlines, and complex rules. Arch Tax can help determine which actions make the most sense for your personal and financial goals. Starting now gives you time to implement strategies that may strengthen your financial position and reduce your overall tax liability. Schedule your free consultation today

Discover the biggest tax benefits of owning a home in 2025—mortgage interest, SALT/property taxes, energy credits, MCCs, and home sale exclusions.

Still waiting on your amended tax return? Get clear answers on IRS delays, processing times, and how to check the exact status of your amended refund.

A CP14 Notice from the IRS can be intimidating, but you have options. Learn what the CP14 means, why you received it, and the exact steps to take to resolve it quickly and confidently—whether you owe the balance or believe the IRS made a mistake.

Spot IRS scam calls fast. Learn how they work, red flags to watch for, and how to protect yourself from impersonators.

It’s a question that can send a shiver down your spine, a classic nail-biter that pops up right around tax season: “How much do I really owe the IRS?” Let’s be honest, navigating the world of taxes can feel like trying to solve a Rubik’s Cube in the dark. Whether you’ve hit a few financial bumps in the road or simply lost track of your tax returns, figuring out your standing with the Internal Revenue Service (IRS) is the first crucial step toward getting your financial house in order. This guide will walk you through the different ways to uncover that magic number, from sleuthing online to making a good old-fashioned phone call. And once you know what you’re up against, we’ll even explore some expert-backed strategies for settling your score with Uncle Sam. Cracking the Code: How to Figure Out What You Owe Finding out your tax liability is easier than you might think. The IRS has several methods available to help you get the information you need. Here’s a breakdown of your options: Your Online IRS Account The quickest and most convenient way to get to the bottom of your tax situation is by using the IRS’s online tools. The “View Your Tax Account” feature on the IRS website is your one-stop shop for all things tax-related. To get started, you’ll need to create an account and verify your identity. You’ll need some personal information on hand, like your Social Security number, date of birth, and the filing status and mailing address from your most recent tax return. Once you’re in, you’ll have access to a wealth of information, including: Your payment history Any outstanding balances you owe Information about your payment plans Digital copies of certain IRS notices This is the fastest way to see what you owe and even make payments online. Just be mindful of any potential bank fees associated with online payments. A Little Help From a Friend: Calling the IRS If you prefer a more personal touch, you can always give the IRS a call. The general inquiry line is 1-800-829-1040. Before you dial, make sure you have your personal information and a copy of your most recent tax return handy. An IRS representative can help you with a balance inquiry, explain any outstanding balances, and walk you through your payment options. While it might take a bit of patience to get through, speaking with a real person can be incredibly helpful, especially if you have questions about your tax records or payment plans. The Paper Trail: Reaching Out by Mail For those who appreciate the tangible nature of snail mail, you can also request your tax information by mail. You’ll need to send a written request to the IRS, and it’s a good idea to use the address listed on the most recent notice you’ve received. If you don’t have a recent notice, you can find the correct address on the IRS website. Keep in mind that this is the slowest method, and with taxes, time is of the essence. Unpaid taxes can quickly accumulate penalties and interest, so it’s best to use a faster method if possible. You’ve Got the Number, Now What? Strategies for Settling Your Tax Bill Knowing how much you owe is half the battle. Now it’s time to come up with a plan to pay it off. Here are some effective strategies for settling your tax bill: File on Time, Every Time: The easiest way to avoid getting into tax trouble is to file your taxes on time, every year. This will help you avoid late filing penalties. Explore Payment Options: If you can’t pay your entire tax bill at once, don’t panic. The IRS offers several payment options, including installment agreements and offers in compromise. You can apply for these online or with the help of an IRS representative. Use Your Refund to Your Advantage: If you’re expecting a tax refund, you can have the IRS apply it directly to your outstanding balance. Look into Penalty Waivers: If you have a good compliance history, you may be eligible for a first-time penalty waiver. It’s worth looking into! Don’t Be Afraid to Ask for Help: If you’re feeling overwhelmed, consider seeking advice from a tax professional. They can help you navigate the complexities of the tax system and find the best solution for your unique situation. Frequently Asked Questions How long does the IRS have to collect unpaid taxes? The IRS generally has 10 years to collect unpaid taxes from the date they were assessed. This is known as the Collection Statute Expiration Date (CSED). However, certain actions, like entering into an installment agreement or filing for bankruptcy, can extend this period. Should I take out a loan to pay my taxes? This is a tricky one. While a loan can provide immediate relief and help you avoid IRS penalties and interest, it’s not without its own risks. You’ll need to be sure you can afford the loan repayments, and you’ll want to compare the interest rate on the loan to the penalties and interest charged by the IRS. It’s always a good idea to consult with a financial advisor before making this decision. How can I check my IRS balance myself? As we’ve covered, you have three main options: online through the “View Your Tax Account” feature on the IRS website, by phone at 1-800-829-1040, or by mail. For the fastest and most comprehensive information, the online portal is your best bet. Dealing with the IRS can be stressful, but it doesn’t have to be a nightmare. By taking a proactive approach and using the resources available to you, you can take control of your tax situation and get back on the path to financial freedom. You don’t have to face the IRS alone.  Contact Arch Tax today and we’ll help you understand your options and take the next step s forward .

Struggling with tax debt? Learn how the IRS determines what you can truly afford to pay!

Learn how a government shutdown impacts IRS tax resolution cases like Offers in Compromise, installment agreements, and audits.