If you currently owe back taxes to the IRS, the Fresh Start Program may help you improve your tax situation. This guide will walk you through some common questions. You will learn:
- What the IRS Fresh Start Program is
- How the program works
- What the requirements are for qualifying for the program
- How you can apply
- What payment options are available
- How to get the most benefit from the program
What Is the Fresh Start Program?
The IRS set up the Fresh Start Program in 2011 to help taxpayers pay back taxes and avoid tax liens. Since it was first launched, the IRS has made several additions to its tax relief programs.
For many years, the IRS has offered struggling taxpayers alternative options to pay their tax liabilities. The Fresh Start program represents a compilation of several of these alternative options. The options are not exactly new, but they represent some changes in the way the IRS evaluates and processes payment agreements and options. Many of these changes may be helpful if you currently owe back taxes.
How Does the IRS Fresh Start Program Work?
- The way the IRS treats tax liens
- The way the IRS handles installment payments
- The way the IRS evaluates and handles offers in compromise
Most of the provisions of the Fresh Start Program are designed to make it easier to repay back taxes and apply for tax relief programs..
How Does the Fresh Start Program Affect Tax Liens?
A tax lien is the government’s legal claim against your property if you neglect or fail to pay a tax debt. A tax lien may be filed after the following steps take place:
- The IRS calculates what you owe.
- The IRS sends you a Notice and Demand for Payment.
- You neglect or refuse to pay your tax debt in time.
Once those three things happen, the IRS can file a Notice of Tax Lien in your county of residence to alert creditors that the government has a legal claim against your property. Before the Fresh Start Program was started, a tax lien could be filed against your property even if you owed less than $10,000 in back taxes and penalties. Although there are exceptions, the IRS does not generally file notices of tax liens unless your tax debt is over $10,000.
How is this provision helpful to taxpayers? It helps taxpayers avoid the negative effects of a tax lien. For instance, a tax lien will:
- Attach itself to all your assets, including business assets, for the duration of the tax lien
- Attach to any new assets you may acquire until the tax lien is released
- Affects your ability to get credit
If a lien has been filed, provisions of the Fresh Start Program may help you get the notice of lien withdrawn. This does not mean that you will not owe the amount due, but it may prevent some of the negative effects mentioned above.
- You pay your debt in full and remain current with all estimated tax payments and filings or
- You are paying your debt through a Direct Debit installment agreement.
How Does the Fresh Start Program Affect Installment Agreements?
The Fresh Start Program helps make streamlined installment agreements more easily available to taxpayers. Setting up an installment agreement with the IRS may help you avoid some tax penalties..
If you owe $50,000 or less, the Fresh Start Program can help you pay your debt through monthly direct debit payments spread out over six years. Because the process has been simplified, you may not even have to provide a financial statement to take advantage of this type of installment agreement.
If you owe more than $50,000, you may still be able to benefit from installment payments. But the IRS will likely require you to provide a financial statement and fill out Form 433-A or Form 433-F. Always consult with a tax attorney before providing personal financial information to the IRS. If you owe more than $10,000, consider hiring a tax relief firm that has tax attorneys on staff. Click here for a free consultation with a senior tax relief expert.
How Does the Fresh Start Program Affect Offers in Compromise?
Sometimes the IRS will allow you to settle your tax debt for less than the full amount they have assessed. This kind of agreement is called an offer in compromise.
The IRS will not accept an offer in compromise if they believe you can pay the amount you owe in full as a lump sum or through a payment agreement. To decide whether your offer in compromise is acceptable, the IRS will consider your ability to pay, your income, your assets, and your expenses.
Under the provisions of the Fresh Start Program, the IRS now uses more flexibility in determining which offers in compromise to accept. This means that, with the Fresh Start Program, you have a better chance of settling your tax debt for less than you owe.
For instance, because of the Fresh Start Program, the IRS now takes into account other financial responsibilities, such as student loans, state taxes, and local taxes when calculating living expenses and your future collection potential. These changes improve the chances the IRS will accept your offer in compromise.
How Can You Qualify and Apply for the Fresh Start Program?
The Fresh Start Program is not one big program. It is a collection of tax relief options for you to use if you owe back taxes. Each alternative carries particular requirements. In other words, there is not a standard list of qualifications you must meet to use qualify for all the programs in the IRS Fresh Start Initiative.
However, there are two requirements all applicants must satisfy:
- File all your tax returns on time.
- Be current with your estimated taxes and any taxes you are required to withhold from employees for the current tax year.
Other requirements are specific to each avenue you choose to use to settle your tax debt. Click here to arrange a free consultation with a senior tax relief expert and find out what programs you qualify for.
To apply for a payment plan, you can use the Online Payment Agreement tool at the IRS website. If you do not want to use the online tool, you can file Form 9465 instead. Applying for an installment agreement, particularly when you reveal details about your assets and sources of income, can have serious consequences. Consult with a tax attorney or a tax relief company that hires tax lawyers before you volunteer financial information that could be used against you in an audit or criminal investigation.
What Payment Options Are Available?
There are a variety of ways you can settle your tax debt. The option that the IRS prefers, of course, is that you pay your tax debt in full in one lump sum payment.
However, if that is not possible, the IRS may accept monthly installment payments instead.
Before you make your payment agreement with the IRS, check whether you qualify for an offer in compromise. Exploring all your options might mean you can settle your tax debt for much less than you originally owed.
How Can You Get the Most Benefit from the Fresh Start Program?
It is true that you can use the tools provided by the Fresh Start Program to negotiate directly with the IRS, particularly if you have a background in accounting and tax law.
But typically, taxpayers get better results when they work with professional tax relief companies. This is because good tax professionals understand all the ins and outs of the program. They have the ability to look at your particular tax situation and figure out which programs of the Fresh Start Initiative will be most helpful to you.
If you are dealing with the IRS on your own, you must remember that the primary goal of the IRS is to collect the taxes you owe, as well as any penalties assessed. On the other hand, a tax professional will be working with your best interests in mind. Rather than treating you as an anonymous cog in the large wheel of taxpayers, a tax relief company will examine your unique tax problems. Then, they will design a plan to handle your negotiations with the IRS.
Tax relief companies can negotiate aggressively in your behalf and settle your tax debt for much less than the full amount assessed by the IRS.
Ensure that you are not paying more than is necessary. Hire a qualified tax relief company when you owe a substantial tax debt. Do you need help? Get a free consultation today.