Are you in tax trouble with the IRS? If you are one of the millions of Americans who owe back taxes, you may be wondering what to do. To address the situation, the IRS re-tooled some of their collection programs. The agency initiated a set of programs known as the Fresh Start Initiative. This guide will discuss what the Fresh Start Initiative programs are. It will also explore how the program can help you resolve the tax issues you are facing.
What Is the Fresh Start Initiative?
The economic crisis in 2008-2009 led to record numbers of unemployed Americans. This caused financial hardship for many families. In 2011, the IRS implemented the first of several programs to assist struggling taxpayers. These programs offer collection alternatives to help resolve tax debt. These alternative options are collectively known as the Fresh Start Initiative.
IRS.gov explains the program in this simple way: “The IRS Fresh Start program makes it easier for taxpayers to pay back taxes and avoid tax liens.”
Has the Fresh Start Initiative Helped American Taxpayers?
According to a report from the Treasury Inspector General for Tax Administration, the Fresh Start Initiative has provided benefits to thousands of taxpayers. From 2010 to 2013, the number of Notices of Federal Tax Lien filed on taxpayers with assessed liabilities below $10,000 decreased 60 percent, from 488,378 to 195,009. Many taxpayers have also taken advantage of the program’s streamlined procedures for processing installment payments and offers in compromise.
How Does the Fresh Start Initiative Provide Help?
The Fresh Start Initiative helps taxpayers in three basic areas: tax liens, installment payments, and offers in compromise. Here is a quick rundown of how the program has changed these three IRS collection programs:
Help with Tax Liens
Before the Fresh Start Initiative was implemented, the amount a taxpayer was allowed to owe before a tax lien was filed was less than $10,000. Now, the IRS will generally not file a notice of tax lien unless you owe less more than $10,000 in back taxes.
This is helpful because a notice of federal tax lien can have a significant impact on your credit score. It may also affect your ability to borrow money, sell property, and conduct financial business.
Also, if a taxpayer meets certain requirements, the Fresh Start Initiative includes the provision of removing a tax lien notice. This process is discussed later in this article.
Related article: How to Remove A Federal Tax Lien Notice From Your Credit Report
Help with Installment Agreements
The IRS offers several different types of installment agreements for taxpayers who owe back taxes, including:
- Guaranteed installment agreements
- Partial payment installment agreements
- Non-streamlined installment agreements
- Streamlined installment agreements
The Fresh Start Initiative makes streamlined installment payments more accessible to taxpayers. Taking advantage of a streamlined installment agreement can help reduce tax penalties. Individual taxpayers who owe up to $50,000 can now pay through monthly direct debit payments for up to 72 months. In most cases, the IRS will not require you to provide a financial statement to use the streamlined installment payment process. This means that you will have less paperwork to do to than if you chose a different type of installment agreement.
You can apply for a payment plan easily by using the Online Payment Agreement tool at IRS.gov. If you do not want to apply online or if you do not have web access, you can file Form 9465, Installment Agreement, to apply. Get a free consultation with a tax relief expert before agreeing to an installment agreement. You may have better options available and installment agreements can have serious drawbacks, such as extending the statute of limitations on the debt you owe.
What happens if you owe more than $50,000? You may still be able to make installment payments, but you will need to jump through a few more hoops to make it happen. First, you will need to provide the IRS with a financial statement. It is likely that the IRS will also require you to fill out Form 433-A, Collection Information Statement for Wage Earners and Self-Employed Individuals or Form 433-F, Collection Information Statement.
Help with Offers in Compromise
An offer in compromise (OIC) is an agreement that allows you to settle your tax debt for less than the full amount. You can explore this option if you cannot pay your full tax liability or if paying the full amount would create a financial hardship for you.
The IRS looks at several factors to make a decision about whether to accept an OIC such as:
- Your ability to pay
- Your income
- Your expenses
- Your asset equity
The OIC option is not designed for everyone. What kind of offers will the IRS accept? IRS.gov answers: “We generally approve an offer in compromise when the amount offered represents the most we can expect to collect within a reasonable period of time.”
It is important to note that the IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. Click here for a free consultation with a tax relief expert to see whether you meet the IRS´s eligibility criteria. It’s free and there is no obligation to join a tax relief program.
The Fresh Start Initiative expands and streamlines the OIC process. The IRS now has more flexibility when analyzing your ability to pay. This means that more taxpayers will be able to utilize the OIC option.
Changes in the OIC process include:
- Allowing for the repayment of taxpayer student loans
- Allowing for the payment of state and local taxes
- Revising the way your future income is calculated
- Including new types of living expense in the Living Expense category and increasing the allowable amount for certain living expenses
- Revising the way your future collection potential is calculated
Before 2012, the OIC option was only available to taxpayers making less than $100,000 annually with less than $50,000 owed. Now, the streamlined OIC has no dollar limitations and covers all taxpayers requesting an OIC.
How Does the Fresh Start Initiative Work for Withdrawing Tax Liens?
The Fresh Start Initiative tax lien program does not cancel your tax debt to the IRS. It simply gives you additional alternatives regarding how to settle your tax debt.
However, the program does allow for a withdrawal of your tax lien from the public records in your county of residence. While not eliminating the debt you owe, withdrawing the tax lien from public records may improve your ability to get a loan or make other financial arrangements.
The Fresh Start Initiative makes it possible for the IRS to withdraw a filed notice of tax lien if you meet certain requirements or pay off your debt in full. You may qualify to have your lien notice withdrawn if you are paying your tax debt through a Direct Debit installment agreement. To request a lien withdrawal, you will need to fill out Form 12277, Application for Withdrawal.
How Do You Qualify for the Fresh Start Initiative?
The guidelines for qualifying for the Fresh Start Program are not clear-cut. To qualify, you must do two things. First, you must file all tax returns due on time. Second, you must have made all the required estimated tax payments for the current year.
Beyond these two requirements, qualifications for different payment alternatives under the broad blanket of the Fresh Start Initiative vary depending upon which option you intend to use. Often, the best thing to do to ensure that you choose wisely is to consult with a tax relief professional who can examine your particular situation and make sure you qualify for the correct type of help.
Should You Do It Yourself or Hire a Tax Professional?
If you feel perfectly confident in your ability to negotiate with the IRS, you can take advantage of the Fresh Start Initiative on your own. However, it is important to note that hiring a tax professional to help you handle your tax debt is usually a better choice. Why is that the case?
A good tax professional will consider your entire financial situation. Based on what that professional discovers, he or she can more accurately determine whether the Fresh Start Initiative options will work in your case. Most programs require you to volunteer detailed financial information. This information can be used against you in a future audit. It’s smart to check with a tax attorney before providing sensitive information to the IRS.
Additionally, a tax professional will help you determine which type of tax relief to pursue. The IRS has one goal: to collect as much money as possible as quickly as possible. A tax professional, on the other hand, has your best interests in mind. His or her goal is to help you handle your tax debt in the best possible way for your particular situation.
A tax professional can often help you avoid penalties and lower your tax liability. Also, he or she may be able to work out a better payment plan for you. . Before spending money you don’t have on expensive retainer and consultation fees, consider hiring a tax relief firm that has tax attorneys on staff. These firms offer the advantages of being represented by a tax lawyer but they don’t charge upfront fees. If you need help right now, get a free consultation today and find out what tax relief programs you qualify for.