Are you in trouble with the IRS? You’re not alone — millions of Americans owe back taxes. To address the situation, the IRS re-tooled some of their collection programs with the goal of making them more accessible and more helpful. The result was the IRS Fresh Start Initiative.
This guide will discuss what the IRS Fresh Start Initiative programs are. It will also explore how the program can help you resolve your tax issues.
What is the IRS Fresh Start Initiative?
The economic crisis in 2008-2009 led to record numbers of unemployed Americans. In 2011, the IRS implemented the first of several programs to assist struggling taxpayers. As such, these programs offer collection alternatives to help resolve tax debt. All together, these alternative options are known as the Fresh Start Initiative.
“The IRS Fresh Start program,” IRS.gov explains, “makes it easier for taxpayers to pay back taxes and avoid tax liens.”
Has the IRS Fresh Start Initiative helped American taxpayers?
According to a report from the Treasury Inspector General for Tax Administration, the Fresh Start Initiative 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 from 488,378 to 195,009. That’s a whopping 60% drop. In addition, many taxpayers took advantage of the program’s streamlined payment programs to help them get ahead of their tax debt.
How does the IRS Fresh Start Initiative provide help?
The Fresh Start Initiative helps taxpayers in three basic areas: tax liens, installment payments, and offers in compromise. Let’s dig deeper on how the Fresh Start Initiative changed each of these collection programs:
A tax lien is the government’s claim on a taxpayer’s property after they fail to pay their taxes.
Before the IRS Fresh Start Initiative, the IRS filed a tax lien for a taxpayer owing $5,000 or more. But today, the IRS will generally not file a notice of tax lien unless you owe more than $10,000 in back taxes.
Why is this helpful? Because a notice of federal tax lien can have a significant impact on your credit score. It can also affect your ability to borrow money, sell property, and conduct financial business.
And if you meet certain requirements, the Fresh Start Initiative includes the provision of removing a tax lien notice. That means that even if your lien was already filed, it could be struck from the record, taking any damage to your credit score with it.
Related article: How to Remove A Federal Tax Lien Notice From Your Credit Report
Installment agreements allow taxpayers to pay back their tax debt in monthly payments.
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.
How does the IRS Fresh Start Initiative help with installment payments? By making them 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 over the course of up to 72 months.
In most cases, the IRS doesn’t even need you to provide financial statement to use the streamlined installment payment process. This means less paperwork standing between you and your chosen installment agreement.
You can apply for a payment plan through the Online Payment Agreement tool at IRS.gov. Alternatively, if you don’t have access to the internet, you can file Form 9465, Installment Agreement instead.
Be sure to get a free consultation with a tax relief expert before agreeing to an installment agreement. There may be better options available. And be wary — some installment agreements can have serious drawbacks. For example, an unexamined agreement may extend the statute of limitations on the debt you owe. That means your debt can follow you for even longer than it would have.
What happens if you owe more than $50,000? You may still be able to make installment payments, but you’ll have to jump through a few more hoops to make it happen. First, you’ll provide the IRS with a financial statement. Next, you’ll 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.
The IRS looks at several factors to make a decision about whether to accept an OIC. These include your ability to pay, your income, your expenses, and your asset equity.
OIC’s are not available for all applicants. What offers will the IRS accept? According to IRS.gov, “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.”
What offers won’t the IRS accept? Generally, the IRS will reject 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 take advantage of OICs.
But what exactly did the Fresh Start Initiative change about OIC policy?
Fresh Start Initiative policy adjustments
- 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, OICs were only available to taxpayers making less than $100,000 annually who owed less than $50,000. But today, the streamlined OIC has no dollar limitations, and covers all taxpayers requesting an OIC.
How does the IRS Fresh Start Initiative facilitate withdrawal of tax liens?
The IRS Fresh Start Initiative tax lien program does not erase your debt. It simply gives you more options to help you 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 your debt, withdrawing the tax lien from public records may improve your credit score. This will make it easier to get a loan, or make other financial arrangements which require a credit check.
To qualify for a withdrawal of your tax lien, you must pay off your debt in full, or meet specific requirements. For example, you may qualify if you’ve arranged a Direct Debit installment agreement to pay off your tax debt
. To request a lien withdrawal, fill out Form 12277, Application for Withdrawal.
How do you qualify for the IRS Fresh Start Initiative?
The guidelines for qualifying for the Fresh Start Program are not set in stone. To qualify, you must do two things. First, you must file all your tax returns on time. Second, you must have made all the required estimated tax payments for the current year.
Beyond these two requirements, qualifications differ for different payment alternatives. Often, your best option is to consult with a tax relief professional. They can examine your specific situation and make sure you qualify for the correct type of help.
Do you need a tax professional to help you navigate the Fresh Start Initiative?
If you feel confident in your ability to negotiate and in your knowledge of tax law, you can take advantage of the Fresh Start Initiative on your own. However, if you are uncertain about your capacity, a tax professional can help you to get the best result — and to avoid making your debt situation worse.
A good tax professional will consider your entire financial situation. Based on these findings, they can more accurately determine whether the Fresh Start Initiative options will work for you.
Most programs require you to volunteer detailed financial information, which 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 soon as possible. A tax professional, on the other hand, has your best interests in mind. Their only goal is to help you handle your tax debt affordably.
A tax professional can also help you avoid penalties and lower your tax liability. Also, they may be able to negotiate 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 formal representation, without any upfront fees. If you need help right now, get a free consultation today and find out what tax relief programs you qualify for.