How Can the IRS Fresh Start Program Help Me?
[Updated 10/19/23]
If you're delinquent on your taxes, there is little you can do to escape paying what you owe. While it might be tempting to run from your tax problems, the IRS will eventually find you.
How would you feel about a fresh start program with the irs?
Fortunately, the IRS has created a Fresh Start Initiative offering relief to individual taxpayers and small businesses. However, as with most government programs, the rules about how to qualify for tax relief can be confusing.
If you are a Maryland resident burdened by tax debt, reach out to a Maryland tax attorney and ask, ”How Can the IRS Fresh Start Program Help Me?
What is the IRS Fresh Start Initiative?
In 2011, the IRS began the Fresh Start Initiative to help distressed taxpayers clean up their tax problems. Through a series of tax code changes, individuals can find relief from federal tax liens and excessive penalties.
There are several ways to clear up your tax problems under the IRS Fresh Start Initiative. Guidance from an experienced tax attorney will help you determine which IRS Fresh Start program is best for you.
IRS Fresh Start Options
Tax relief through IRS Fresh Start is available in many forms, whether by eliminating late fees and penalties, establishing payment options, or forgiving past tax balances.
The two most popular Fresh Start options are Payment Plan Installment Agreements and Offer in Compromise. Under these programs, qualifying individuals can pay off their debts in manageable payments over time or find a portion of their tax liability forgiven through reassessment and tax lien removal.
Payment Plan Installment Agreements
The IRS offers several short and long-term payment plans to pay a tax debt. Individuals unable to pay their tax bill with their tax return should work with their tax lawyer and the IRS to identify a payment plan.
Each taxpayer's situation is unique. Your attorney may be able to negotiate an extended period to repay the debt, a reduction in the taxes you owe, or a debt forgiveness clause that takes effect once specific parameters are met.
Regardless of the terms of your IRS payment plan, you must pay your installments on time. Failure to pay on time or meet any additional requirements of the agreement could nullify the deal.
Short-Term IRS Payment Plans:
If you’re unable to pay your tax bill by the deadline for the year you are filing, you may be able to make installment payments. Generally, the IRS will stretch these payments over 120 days*, though you may accrue interest and penalties until the amount is paid in full.
*Due to COVID-19, the IRS has amended the short-term installment option to allow 180 days for taxpayers to pay off their debt.
Long-Term IRS Payment Plans:
Taxpayers needing additional time to settle a large tax liability may be eligible for a long-term payment plan with the IRS. Long-term plans allow for the repayment of taxes over several months.
Though the Fresh Start Initiative prevents certain fees and penalties from being assessed under the extended plan option, the taxpayer may be assessed a setup fee.
Taxpayers owing $50,000 or more in back taxes, with no reasonable ability to pay the debt within six years, should rely on their tax attorney to broker a special payment agreement with the IRS.
Offer In Compromise
The IRS has recognized that many taxpayers are struggling to pay their bills and there is no reasonable expectation of collection for the full tax debt owed.
An Offer in Compromise allows the IRS to settle the taxpayer's tax liability for less than the full amount owed. An Offer in Compromise is subject to specific legal requirements. It is only accepted if the IRS believes that alternative means of collection, such as payment plans, will not satisfy the debt.
An in-depth financial analysis of the taxpayer’s income, expenses, assets, and debts determines if the taxpayer is eligible for the OIC program. If a taxpayer qualifies for an OIC, the IRS will reduce their tax liability and establish payment arrangements. The taxpayer must make full restitution of the modified tax bill within two years from the date the offer is accepted.
How Do I Qualify for the Fresh Start Program?
While many factors are considered when determining if you qualify for IRS Fresh Start programs, there are a few standard requirements:
Individual taxpayers cannot exceed $100,000 income
Joint taxpayers may not exceed $200,000 income
Self-employed individuals must verify a 25% drop in net income
Your year-end tax liability must fall below $50,000
Other criteria that will influence whether or not the IRS approves a Fresh Start process for you include:
Ability To Collect:
If the IRS reasonably believes they can collect the full tax balance owed, they are less likely to offer a reduction in taxes or penalties. You may still qualify for a payment agreement arrangement.
Incorrect Tax Assessment:
If you have records to substantiate that you don’t owe what the IRS is alleging to be your tax debt, there may be justification for the IRS to reduce your tax bill. Time is of the essence in notifying the IRS of the claimed mistake as the challenge period is limited by law.
Effective Tax Administration:
The IRS may determine that collecting the balance of taxes you owe would cause significant or undue hardship to you, or the likelihood of the IRS being able to collect the full balance from you is remote. In that case, they may offer a long-term payment agreement, penalty relief, or reduction of your tax liability.
How Do I Apply For a Fresh Start Program?
The first step to applying for the IRS Fresh Start Program is to determine your eligibility. If you are uncertain whether your circumstances qualify you for an IRS debt relief program, reach out to a tax attorney for help.
Tax lawyers experienced with the IRS Fresh Start Initiative can assess your situation, explain the guidelines of IRS tax repayment and relief options, and begin your application process.
The approval process for an IRS Fresh Start can take several months. Working with a skilled tax attorney will ensure that you meet all application requirements and avoid any missteps that could cause a delay in processing.
Contact A Maryland Tax Attorney Today
Living in the shadow of looming tax debt is not necessary. If you have unpaid taxes or cannot afford your current tax liability, there is help.
The IRS Fresh Start Initiative has helped thousands of Maryland residents satisfy their IRS tax obligation and gain a new financial beginning.
Contact our office to speak with an experienced Maryland tax attorney about your tax burden. We offer a comprehensive case review of your tax situation and an actionable plan for IRS tax relief.
Stop living under the fear of liens, interest, and penalties. Call our Maryland tax law firm today.
IRS Fresh Start Program FAQs
What Is The IRS Fresh Start Program?
The IRS Fresh Start Program is an initiative designed to make it easier for individual taxpayers and small businesses to pay back taxes, avoid tax liens and wage garnishments. The program offers various options such as installment agreements, Offers in Compromise, and penalty abatements to help taxpayers settle their tax debts.
Who qualifies for the IRS Fresh Start Program?
Generally, individual taxpayers who owe up to $50,000 and businesses that owe up to $25,000 may qualify for the Fresh Start Program. Eligibility criteria may include the taxpayer's ability to pay, income, expenses, and asset equity. It's essential to consult the IRS guidelines or a tax professional for specific eligibility requirements.
How do I apply for the IRS Fresh Start program?
To apply for the IRS Fresh Start Program, eligible taxpayers typically need to fill out specific forms depending on the relief option they're seeking. For installment agreements, you may use IRS Form 9465. For an Offer in Compromise, you'll need to complete Form 656. These forms should be submitted to the IRS along with any required documentation to obtain the tax debt relief you are looking for.
How much does the IRS Fresh Start Tax Program cost?
The cost of participating in the Fresh Start Program varies depending on the repayment structure and the relief option chosen. For instance, setting up an installment agreement may come with a setup fee, while an Offer in Compromise requires a non-refundable application fee. Additional costs may include accrued interest and penalties on the outstanding tax debt.
How long does the IRS Fresh Start Program last?
The duration of the Fresh Start Program depends on the specific relief option and the terms agreed upon with the IRS. Installment agreements, for example, can last up to 72 months, while an Offer in Compromise usually concludes once the agreed-upon lump sum is paid.
What Changes Have Been Made to the Fresh Start Initiative?
The Fresh Start Initiative has undergone various changes since its inception, including adjustments to eligibility criteria and payment terms. These changes aim to make the program more accessible and beneficial for taxpayers facing financial hardship. It's advisable to consult the IRS website or a tax professional for the most current information.
How Can The IRS Fresh Start Program Reduce Tax Debt?
The Fresh Start Program offers various options to reduce a tax debt balance, such as penalty abatements and Offers in Compromise, which allow taxpayers with financial hardship to settle their debt for less than the full amount owed. These options aim to make repayment more manageable and minimize the financial burden on the taxpayer.
Is the Fresh Start Program a Good Idea?
The Fresh Start Program can be a beneficial option for those struggling with tax debt, as it offers more lenient payment terms, affordable monthly payments, and the possibility of reducing the overall debt. However, it's essential to carefully review the terms and consult a tax pro to determine if it's the right solution for your specific situation.
Will There Be a Penalty for Using the Fresh Start Program?
Generally, there are no additional financial penalties for participating in the Fresh Start Program. However, interest will continue to accrue on the outstanding balance, and failure to comply with the terms of the agreement may result in penalties or termination of the program.
What if I can't afford a payment plan?
Before consulting a tax relief company, consider talking with qualified tax professionals. If you find that you can't afford a payment plan or installment agreement, you may be eligible for other relief options like an Offer in Compromise, which allows you to settle your tax debt for less than the full amount. It's crucial to communicate with the IRS or consult a tax pro to explore alternative solutions and avoid a federal tax lien.
Can The IRS Reopen My Debt After A Fresh Start Initiative Settlement?
Once you've successfully completed the terms of your Fresh Start Initiative agreement, the IRS generally will not reopen your case unless there is evidence of fraud, tax evasion, or non-compliance. It's essential to adhere to the terms of the agreement and consult tax attorneys for specific guidance.
What happens if the IRS sends you to collections?
If the IRS sends your tax debt to collections, it means your overdue tax account has been assigned to a private collection agency. Before this happens, you will receive two letters: Notice CP40 and Publication 4518 from the IRS, followed by an initial contact letter from the private collection agency. These letters will contain a Taxpayer Authentication Number, which is used to confirm your identity and verify the legitimacy of the caller.
Once your account is in collections, you are expected to work with the assigned private collection agency to resolve your overdue taxes. The agency will ask you a series of questions to confirm they are speaking to the correct person and will exchange portions of the Taxpayer Authentication Number to validate each other's identity. The private collection agency is expected to be courteous, professional, and respectful of your taxpayer rights. They will work with you to resolve your overdue taxes and will not threaten you. If you feel the agency acted inappropriately, there are avenues to report such behavior.
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