Did you know that in 2021, Americans owed a total of $134 billion in assessed taxes, penalties, and interest?
If you’re behind on your taxes and owe money to the IRS, there’s a way out. The IRS Fresh Start Program can be your lifeline. This article will cover everything you need to know about the program and how it can save your financial life.
What is the IRS Fresh Start Program?
Created in 2011, the IRS Fresh Start is a tax relief service program that allows individuals struggling with tax debt an opportunity to pay back significant tax debt. This program was started specifically for individuals in deep financial straits who owe more money to the IRS than they can afford.
How the Program Works
Individuals qualified for the program have several options for repayment based on their ability to pay. To get a better idea of how these programs work, let’s look at a few options.
Offer In Compromise (IRS Settlement)
The Offer In Compromise (OIC) repayment option allows a taxpayer to resolve their tax debt for less than the full amount owed. The OIC has strict qualifications, making it a rare choice for most taxpayers looking to use the Fresh Start Program. To have the best chance of receiving this option, it’s best to make sure all tax forms are filled out by a trusted tax professional.
An Installment Agreement is a monthly payment to the IRS for tax debt. This monthly payment amount is mutually agreed upon between the IRS and the individual paying back their debt. Payments are sent until all debts get paid off, and the individual receives no more collection letters or penalties during the process.
However, using an Installment Agreement adds interest to the original amount owed. This means that individuals using this option will pay more than was originally owed.
Penalty Abatement is when the IRS cleans or reduces an individual’s penalty. Like the OIC, this option is extremely rare and only applies under strict guidelines. Individuals looking to use this option should consult the help of tax professionals before applying.
How To Qualify For IRS Fresh Start
To qualify for the program, you must be able to prove that paying what you owe back in taxes would cause you to be in financial hardship. The IRS has clearly defined guidelines on what it considers financial hardship. All individuals must meet the following requirements:
- No history of falling behind on taxes
- Able to pay all debts back in 5 years or less
- Cannot have pending tax returns unfiled
- Must owe less than $50,000 in back taxes to the IRS
- Up-to-date on current year tax filings
Take Advantage of the Fresh Start Program
No one likes owing money to the IRS. The dark cloud of owing back taxes doesn’t have to follow you forever. If you’re in a bind and can’t afford to pay, consider applying for the IRS Fresh Start Program.