The IRS’s Fresh Start Program assists those who owe the agency money with payment plans and other means of relief, thus avoiding tax liens. The program encompasses different options for debt relief, such as changes to installment agreements, offers in compromise, and currently not collectible status.
The six-year program was created for first-time tax offenders as an opportunity to fix the situation. Taxpayers can pay off their debt monthly through payments based on current earnings and liquid asset value. In most cases, all dues are cleared within six years.
The Fresh Start program is a win-win for both taxpayers and the IRS. Taxpayers can pay their debt without severe penalties such as tax liens, levies, or jail time. The IRS is then also able to collect payment rather than none at all.
How Does The Fresh Start Program Work?
The Fresh Start program is designed to make the payment process easier and less intimidating for those who owe taxes. There are four primary programs that taxpayers can take advantage of through the Fresh Start Program:
- Installment Agreement
- Offer in Compromise
- Currently Not-Collectible Status
- Penalty Abatement
Installment Agreements:
An installment agreement with the IRS allows taxpayers to make monthly payments toward their balances. It’s important to understand that the IRS will only accept installment agreements if they believe they will be able to collect the balance owed in full.
Once you sign up for an installment plan, the IRS will no longer send collection letters or penalty fees.
The IRS will continually add interest to your total amount owed, meaning you will end up paying more than the original debt, even though the monthly payment through the Fresh Start Program may change.
Offer In Compromise:
An Offer in Compromise allows taxpayers to settle their tax debt for less than they owe. This type of arrangement is beneficial to the IRS as it allows them to get something from a taxpayer who may not be able to pay the full balance owed.
Usually, the IRS opts to reject OICs (offers in compromise) when they speculate that they can gather the entire amount through either a lump sum payment or an installment plan from the said taxpayer. The total money earned is based on an estimation of their income and assets; though, there are times when OICs have to be accepted due to certain legalities.
The IRS provides two methods for taxpayers to pay their outstanding tax debts through an Offer in Compromise.
Lump sum:
You will have five months to pay this amount, which must include 20% of your offer total.
Payment plan:
The IRS requires that you pay your taxes over a two-year period. The first payment, along with the application fee, is due upon submission of your paperwork.
Currently Not-Collectible Status:
If taxpayers can’t make payments or an Offer in Compromise won’t work, they can apply for Currently Not-Collectible Status. This means that the IRS will not take any collection action on the debt while the taxpayer’s financial situation is in flux.
Those with Non-Collectible Status are not necessarily free of tax debt, but the IRS can no longer collect from them through methods such as bank levies and wage garnishments. This status allows those in it to find Fresh Start tax relief without any fear or harassment from the IRS.
Penalty Abatement:
The Fresh Start Program also allows taxpayers to request penalty abatement for some penalties associated with their debts. This request may be granted if the taxpayer can demonstrate that there were mitigating circumstances for why they were unable to pay their taxes on time.
How Can I Apply For The IRS Fresh Start Program?
Requests for tax relief that do not include enough evidence will not be accepted by the IRS through any of the programs in its Fresh Start Initiative. If you’re mailing a request, include as much supporting documentation and proof as possible. Documentary evidence is the best form available to back up your claims against the strict qualifications set by the IRS.
The requirements to receive tax breaks from the Fresh Start Program are that all unfiled or missing tax returns must be submitted, your estimated taxes for the current year should be up-to-date, and your withholdings from each paycheck should reflect the proper amount. In addition, any filings made in the last six months must either be current or accurate.
Qualifications For The IRS Fresh Start Program
If you want to receive tax relief through the federal Fresh Start Program, you have to meet specific qualifications set by the IRS. To qualify for the program and prove that paying your taxes would cause significant financial hardship, you must provide detailed documentation of your current financial situation.
The severity of your financial hardships will determine which type of Fresh Start tax program is available to you.
Taxpayers or the tax relief companies representing them are fully responsible for providing evidence of financial hardship to the IRS.
Do I Need A Professional Assistance?
It all comes down to how much you owe and your ability to repay the amount. If you’re facing a minimal sum that can be repaid quickly, then maybe going at it alone makes sense. But if things are more complicated, having professional help from an enrolled agent, CPA or lawyer could make a crucial difference.
A tax professional can assess your financial situation and give you an accurate picture of what type of relief if any you are eligible for. A professional will also be able to collect all the necessary documents, file them with the IRS and represent you throughout the process.
The Bottom Line:
The Fresh Start Program is the perfect solution for taxpayers who are behind on their taxes and don’t want to worry about penalties or interest.
If you need help getting started with the program, Ideal Tax Solutions can help. At our company, we have extensive experience with filing taxes and can help you utilize the Fresh Start Program. Taxes no longer have to be a stressful event with this method.
Give us a call today to learn more about Ideal Tax Solutions and how we can help you take advantage of the Fresh Start Program.