The Internal Revenue Service (IRS)’ Fresh Start Initiative aims to help struggling taxpayers to pay off their debt. If you have tax debt, you’re likely wondering whether the Fresh Start Initiative can help you with your unpaid taxes. To find out how to qualify for the Fresh Start program, read on!
What is the Fresh Start Initiative?
The IRS’ Fresh Start Initiative is a collection of programs which draw a roadmap for taxpayers looking to pay off their tax debt. Fresh Start offerings include:
- Installment agreements, wherein taxpayers set up a payment plan to pay off their debt in regular monthly increments.
- Offers in compromise, wherein a taxpayer settles to pay less than their total debt.
- Withdrawals of tax liens, wherein the IRS removes the public Notice of Tax Lien. This helps the taxpayer’s credit and makes it easier for them to qualify for loans.
- Penalty abatement, wherein the IRS waives certain late payment penalties due to qualifying circumstances.
How do you qualify for the Fresh Start Initiative?
There isn’t a single set of requirements to qualify you for the IRS Fresh Start Program. Eligibility varies depending on your chosen tax relief program. However, these are the general requirements most tax relief applicants must meet.
To qualify for tax relief under the IRS Fresh Start Program, you must:
- Prove you do not have the money or assets to pay your tax debt.
- File all the tax returns you’re legally required to file. Even if you can’t afford to pay them, file them.
- Make all required estimated tax payments for the current year. This only applies to self-employed workers and small businesses owners.
- Make all required federal tax deposits, if you own a business with employees.
- Not be in an open bankruptcy proceeding.
Beyond that, each of the Fresh Start Initiative’s individual tax relief programs have additional requirements.
How do you qualify for an installment agreement?
There are different forms of installment agreement, depending on your circumstances.
To qualify for a guaranteed installment agreement (a 3-year payment plan), you must:
- Owe $10,000 or less in back taxes.
- Have filed and paid your taxes on time over the previous five years.
- Be up-to-date on filing your current taxes.
- Pay off your taxes within 36 months.
- Have had no installment agreement within the previous five years.
- Agree to file and pay on time in the future.
To qualify for a streamlined installment agreement (a 72-month program), you must:
- Owe the IRS $50,000 or less.
- Pay by direct debit or through payroll deductions.
- As an individual, business, or business that has gone out of business: owe less than $25,000 in unpaid taxes.
- As an individual or out-of-business sole proprietor: owe $25,000 to $50,000 in unpaid taxes.
To qualify for a partial pay installment agreement (wherein you’ll agree to pay less than your total debt), you must:
- Owe over $10,000 combined IRS tax debt, penalties, and interest.
- Have filed and paid all taxes for previous years.
- Have no marketable assets.
- Not be in bankruptcy or have an active offer in compromise.
- Let the IRS assess your living expenses and set your monthly payment based on what they decide you can afford.
How do you qualify for an offer in compromise?
There are three reasons why the IRS might offer you an offer-in-compromise:
- You don’t have the income or assets to pay your tax debt in full.
- You have the income to pay in full, but it would create a severe economic hardship.
- The IRS has doubts about whether you actually owe the full amount of tax. As you probably guessed, this last reason is extremely rare.
And to qualify, you must:
- File all required tax returns.
- Be up-to-date with estimated tax payments (self-employed and business owners).
- Be up-to-date with federal tax deposits (businesses with employees).
- Not currently be in an open bankruptcy proceeding.
How do you qualify for penalty abatement?
To qualify for first-time penalty abatements, you must:
- Have no penalties in the three previous tax years.
- File all required tax returns.
- Pay off any due taxes.
How do you qualify for a withdrawal of tax lien?
For the IRS to withdraw a Notice of Tax Lien, you must either:
- Pay off the lien in full, comply with all tax filings in the last three years, and be current on estimated tax payments; or,
- Enter into a direct debit installment agreement. For this option, you must owe $25,000 or less, and you cannot have defaulted on any Direct Debit Installment Agreements in the past.
In addition, you’ll have to fill out Form 12277, Application for Withdrawal.
Ready to get started?
Have you determined that you qualify for one or more of the IRS Fresh Start’s tax relief programs? If so, it’s time to apply! But which program best suits your financial circumstances? And how can you negotiate with the IRS to get the best deal possible?
Dealing with the IRS can be daunting. Fortunately, there are experts who can help. SuperMoney has compiled a list of the top tax relief firms on the market. These companies have the expertise and the experience to negotiate with the IRS on your behalf, securing you the very best tax relief solution you can get.