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What Is The IRS Fresh Start Program?
- Launched in 2011, the IRS Fresh Start Initiative provides eligible taxpayers with tax debt relief and financial hardship assistance. The US government created this program to counter the IRS’s collection practices, such as high penalties and compounding interest rates.
- The IRS Fresh Start Program offers penalty and interest relief, extended IRS payment plans, installment agreements, and other options for taxpayers with established financial hardship from the coronavirus or other causes.
- Taxpayers who qualify can settle with an “Offer in Compromise,” agreeing to pay a lesser amount of their debt if they meet future tax obligations punctually.
- Qualify for Fresh Start programs by showing a history of inability to pay the total tax bill in one payment without causing financial hardship.
- Owe more than $50,000 in taxes? The IRS needs extra info for Fresh Start debt relief: income proof and budgeted living expenses (housing, etc.).
- No consideration for certain taxes, e.g., payroll or trust fund recovery penalties on employers who don’t deposit payroll taxes into Social Security and Medicare Trust Funds.
How Does The Program Work?
There are four main programs available to taxpayers through the Fresh Start Program:
- Installment Agreement
- Offer in Compromise
- Currently Not-Collectible Status
- Penalty Abatement
What Is The IRS?
The Internal Revenue Service is the revenue service of the established United States federal government, responsible for collecting U.S. federal taxes and administering the Internal Revenue Code, the main body of the federal statutory tax law.
What Is An Installment Agreement?
Through the Fresh Start Program, taxpayers can pay the IRS a regular monthly payment instead of the whole debt at once. Installment agreements are available. Every month, taxpayers can make an agreed-upon payment to the IRS. Payments are directed to the taxpayer’s overall tax debt and continue until it is completely repaid.
You will no longer receive IRS collection letters or be subject to penalties once you’ve signed up for an installment plan.
This plan also provides the IRS with proof that you will take care of your debt. Although the monthly payment you make through the Fresh Start Program may change, the IRS will continue to add interest to your total debt. This means you will end up paying more than what you originally owed.
The IRS Fresh Start is mentioned in a book by Frances Phillips and Stan Hutton called “Nonprofit Kit For Dummies.”
What Is An Offer In Compromise?
An OIC is an arrangement between a taxpayer and the IRS that pays the taxpayer’s tax liabilities in whole or part. When the IRS does not accept an OIC, they usually believe they can collect the whole amount as a lump sum or through a payment agreement. The IRS uses the taxpayer’s income and assets to determine the reasonable collection potential. OICs must be accepted according to legal requirements.
What Does “Currently Not Collectible” Status Mean?
Unlike the other Fresh Start tax programs, Non-Collectible Status is a ‘status’ rather than a form of tax relief. The IRS might place a taxpayer in Currently Non-Collectible Status if they cannot pay their taxes. Tax levies, wage garnishment, tax liens, and IRS collection notices are all prohibited in this status. To obtain Fresh Start tax relief without IRS interference, a taxpayer must be in Currently Non-Collectible Status.
What Is Penalty Abatement?
The IRS refers to Penalty Abatement as Fresh Start tax relief. Penalty Abatement is a type of penalty mitigation. However, the IRS will only offer Penalty Abatement with a reasonable cause. See the IRS website for a list of IRS locations where you can request Penalty Abatement. You can also request Penalty Abatement by speaking with IRS personnel at a local office. You may request Penalty Abatement at any IRS collection level, including at a local IRS office. You may request Penalty Abatement at any IRS collections level, including at a local office. However, a local IRS office may only offer Penalty Abatement up to $100. Making a request is free.
How To Apply:
You can apply for the Offer In Compromise Here: https://www.irs.gov/payments/offer-in-compromise
To qualify for the program, you must fill out and submit Form 1127A or Form 8821.
- Additionally, those unable to pay the total amount due may be able to settle their balance through an Offer in Compromise (OIC) or Partial Payment Installment Agreement (PPIA).
- One of the most important things that newbies should know about this program is that it can help them get out of debt faster than they would if they just tried to make payments on time each month.
- Another key point is that it may not always be possible for everyone who applies; specific requirements must be met before someone can become eligible for this program.
- Finally, while the Fresh Start Program does offer some relief from liability associated with unpaid taxes, it’s essential for people using it to understand all of the details, so they don’t end up worse off than before!
- Try The Fresh Start Program Calculator here.
Who Qualifies For The Program?
Taxpayers who qualify for the program are those ready to pay their tax debt through installments paid over a specific period and decided based on a repayment structure.
If you are an individual taxpayer happy to repay the debts you owe in a series of installments with a direct payment structure, you could benefit from the program. This agreement allows qualified individuals to pay off their taxes in smaller, more manageable amounts over some time, with limited penalties on tax liability.
The IRS will consider your ability to pay, current income and expenses, and asset equity in determining what they believe you can reasonably repay.
Each option has a different procedure, qualifications, and application process.
You have to meet the requirements listed below:
- You owe less than $50,000 or more than $50,000, but you can reduce your debts to this amount before starting the program.
- You can pay off your outstanding debt in less than 60 months.
- Your tax return is filed and up to date.
- This is the first time you’ve fallen behind on payments to the IRS
- You will agree to a direct payment installment agreement
- You will maintain the installment agreement, keep up to date with tax filings, and will not incur further tax debt while you are paying your installments
- You will file for OIC and can pay off the agreed Fresh Start Initiative settlement amount within 12 months.
As a first-time debtor, you may also be eligible for a reduction of specific penalties. For example, if you owe less than $25,000 or you can reduce your debts to this amount before starting the program, you may also qualify to have a federal tax lien removed.
The program offers three repayment options: an extended installment agreement, a tax lien withdrawal, and an offer in compromise.
For more information on how to apply for the IRS Fresh Start Program, please get in touch with us for a free tax case review.
If your business owes taxes, you could also be eligible for the Fresh Start Program. In this scenario, you will need to meet the following requirements:
- Your company owes less than $25,000
- You will be able to repay the total amount within 34 months
- Your business is up to date with current federal tax filings and payments
- It’s the first time your company has fallen behind on payments to the IRS
- You will also need to fill out Form 433-A Collection Information Statement for Wage Earners and Self-Employed Individuals. The qualified business income deduction can be an excellent way to reduce your income taxes for many small business taxpayers.
- The goal is to make the payments affordable so you can pay them on time without a financial burden.
Of course, we’ve only touched on the basics of the program. If you have any further questions, would like a firm answer regarding whether you’re eligible for the program, or want to apply for the Fresh Start Initiative, don’t hesitate to contact us! Whatever your situation, our qualified, experienced, and friendly tax professionals can guide you in the right direction.
For more information on how to apply for the program, please get in touch with us for a free tax case review.
Pros And Cons
- The IRS Fresh Start Initiative offers taxpayers more time to pay taxes they owe by reducing the amount of interest and penalties. This can be especially beneficial for those struggling financially who need additional time to pay their taxes.
- The program also helps reduce financial stress since it allows taxpayers more flexibility in managing their debt obligations, making it easier to stay current with all tax payments due.
- Taxpayers may also qualify for other forms of relief through the program, such as a streamlined installment agreement or an offer in compromise, which could ultimately help them lower or settle their delinquent tax liabilities, depending on individual circumstances.
- Depending on income levels and state residency status, some taxpayers may not be eligible for immediate assistance through the Fresh Start Program. That makes navigating tax–related issues even more complicated when finances are already stretched thin.
- Additionally, applying for any loan from the IRS will require extra paperwork and proof of income that is often unavailable if a taxpayer recently lost his or her job or had other changes to income sources over recent months/years. This can further delay access to much-needed resources and add another layer of complexity when trying to get back into good standing financially with Uncle Sam!
- Lastly, there are fees associated with certain aspects of the Fresh Start Program (i.e., application fee). While these fees are generally nominal compared to what would be owed without taking advantage of this service option, they still represent another cost that must be considered before deciding whether or not participating in this program is correct for you!
How Can We Help?
- We offer financial hardship assistance.
- We can prepare your applications and advise you on the appropriate next steps.
- We will help set up your IRS payment plan.
- We are tax debt relief experts on your side!