IRS Fresh Start Program: an Overview of the Process
It’s simple. If you neglect to pay your tax debt on time, you will end up paying more money, usually in penalties and interests and the accrual of these additional fees seems to make the existing balance almost impossible to pay off.
While you might be surprised to hear this, IRS agents actually don’t like this to happen. The IRS doesn’t make any money from people who don’t pay their taxes. As a result, they created the Fresh Start Program in the hopes that they could wipe away certain debts to increase the chances of returning people to solvency.
What is the Fresh Start Program?
Typically, owing an extreme amount of debt towards the IRS can lead to wage garnishments, foreclosure, and even bankruptcy. It’s for precisely this reason that the Internal Revenue Service (IRS) offers taxpayers the Fresh Start program, an initiative which makes it easier for taxpayers to pay back their taxes and avoid tax liens. Below is an overview of what the Fresh Start program is and how it works.
According to the IRS website, there are three critical features of the Fresh Start program:
1. Tax Liens
The IRS has recently increased the amount that taxpayers can owe before the IRS files a Notice of Federal Tax Lien. That amount is $10,000. However, there are those rare cases where the IRS may still file a lien notice if the amount is less than $10,000. In most situations, this shouldn’t happen but there is the possibility that the IRS might feel it necessary to do so if some other occurrence has made feel that you’re unable to keep up with things for whatever reason. Should this happen, then the end result will be the same.
Once a taxpayer meets satisfied requires for paying off their tax debt, like paying off enough that they owe the IRS less than $10,000, the IRS can withdraw a filed Notice of Federal Tax Lien, which the taxpayer must request in writing using Form 12277, Application for Withdrawal.
If taxpayers are paying their tax debt through a Direct Debit installment agreement, some may qualify to have their lien notice withdrawn, which also requires a written request by using Form 12277. But the IRS may file a new Notice of Federal Tax Lien and resume collection actions if the taxpayer defaults on the Direct Debit Installment.
2. Installment Agreement
The IRS Fresh Start program offers installment payments, which is beneficial for taxpayers who can’t afford to pay off their taxes in one lump sum. The small installments are spread out over a period of 72 months (six years) if you owe less than $50,000 in taxes. Sometimes a financial statement is required. If a taxpayer owes more than $50,000 in tax debt, they will need to provide the IRS with a financial statement.
Keep in mind that if you owe that much money, it shouldn’t be too difficult to get your hands on a relevant statement. In fact, you might have more than enough of them sitting around staring you in the face. If this is the case, then make sure to attach all the documentation with your request. Depending on your situation, you might be given a grace period longer than 72 to pay things off. Most taxpayers should find that kind of extension is quite helpful, however.
3. Offer in Compromise
An Offer in Compromise is a plan that gives taxpayers the opportunity to settle their tax debt for a lesser amount if the IRS believes that the taxpayer can pay the entire amount off. Although this may seem like the better choice, not everyone can qualify for the Offer in Compromise. The IRS looks at the taxpayer’s income and assets, among other things, to decide the taxpayer’s ability to pay. While the IRS does eventually want to get their money, they’re willing to accept less at times because they’d rather walk away from the table with something rather than nothing. It’s quite rare, however.
In fact, in an overwhelming majority of situations, the IRS will fight to try and get you to take some other proposal. Even though the other options are better than nothing, an Offer in Compromise is certainly attractive for those who are under crushing levels of debt and can’t imagine any other way out. If this does sound like the situation you’re in, then you’ll definitely want to get in touch with certified professionals who can increase your chances of making this kind of offer.
Hire Success Tax Relief to help with your Fresh Start!
The Fresh Start Initiative might seem simple to implement on your own, but each of the three steps requires a vigorous investigation to determine whether or not you qualify for this program. Success Tax Relief can help. We are well versed in the business of tax relief and trained to solve any tax problems you may have with the IRS. Call and schedule an appointment for a free consultation.Contact us online today and we’ll connect you with experienced professionals who will look over your case and get you the help you need.