I was asked by a client about the IRS ‘Fresh Start’ program she had heard about. The fact is that there is really no such new program. It’s basically just the IRS stating this: We know there are millions of middle-class people that owe thousands of dollars of back taxes and keep ignoring us until we play hardball. It’s better for both you and us if we just negotiate either a monthly payback plan or a single payoff amount.
The IRS Fresh Start Program is an initiative designed to help taxpayers who owe the IRS but are struggling to pay their tax debt. It provides several options to make it easier for individuals and small businesses to pay back taxes and avoid penalties. Here’s a summary of the key components of the Fresh Start Program:
Key Components of the IRS Fresh Start Program
- Installment Agreements:
- Streamlined Process: The Fresh Start Program expanded access to streamlined installment agreements, allowing more taxpayers to pay off their debt over time without providing extensive financial documentation.
- Threshold Increase: The threshold for streamlined installment agreements was increased from $25,000 to $50,000. Taxpayers owing up to $50,000 can set up an installment agreement and pay their debt over a period of up to 72 months.
- Offer in Compromise (OIC):
- The Fresh Start Program made it easier for taxpayers to settle their tax debt for less than the full amount owed through the Offer in Compromise program. This is particularly aimed at those who can’t pay their full tax liability or doing so would create financial hardship.
- Eligibility Expansion: The IRS expanded the criteria for eligibility, making it accessible to more taxpayers. The program considers the taxpayer’s income, expenses, asset equity, and ability to pay.
- Lien Withdrawal:
- Eased Requirements: The program made it easier to obtain lien withdrawals after a tax debt is paid. Taxpayers can also request a lien withdrawal if they owe $25,000 or less and enter into a Direct Debit Installment Agreement.
- Impact on Credit: This helps taxpayers by improving their credit score since a tax lien can significantly impact creditworthiness.
- Penalty Relief:
- The Fresh Start Program offers relief from certain penalties to eligible taxpayers. For example, first-time penalty abatement can be applied if taxpayers meet specific criteria.
- Eligibility Requirements:
- Generally, to qualify for the Fresh Start Program, taxpayers must be current with all filing and payment requirements. They must also be unable to pay their tax debt in full.
How to Apply
- Installment Agreements: Taxpayers can apply online using the IRS Online Payment Agreement tool or by submitting Form 9465.
- Offer in Compromise: Taxpayers must complete and submit Form 656 and Form 433-A (OIC) or Form 433-B (OIC), along with the required application fee and initial payment.
- Lien Withdrawal: After meeting the eligibility requirements, taxpayers can submit Form 12277 to request a lien withdrawal.
Resources
For more detailed information and guidance on applying, you can visit the IRS Fresh Start Program page or refer to the IRS Publication 594, which provides comprehensive details on the collection process and payment options.
