Ultimate Guide to IRS Fresh Start Initiative Programs

Everything you need to know about IRS Fresh Start initiative programs

The IRS Fresh Start program makes it easier for taxpayers to qualify for tax relief. However, it can still be a slow and painful process. Tax relief companies can help you determine whether you qualify for a program and which is the best deal. 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. Altogether, these alternative options are known as the Fresh Start Initiative.

The IRS Fresh Start program makes it easier for taxpayers to qualify for tax relief. However, it can still be a slow and painful process. Tax relief companies can help you determine whether you qualify for a program and which is the best deal.

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 Program work?

The IRS Fresh Start Program is better understood as a tax relief toolbox that contains a set of measures designed to help individuals and small businesses. There isn’t a single form to fill in. Instead, there are a variety of tax relief measures to choose from.

There are four principal tax relief measures: tax liens relief, installment agreements, penalty relief, and offers in compromise.

How to avoid tax penalties and liens with the IRS Fresh Start Program

Tax Liens – The Fresh Start Program increased the debt threshold that triggers a tax lien. Now, you have to owe $10,000 or more before the IRS will place a tax lien on your property. Previously, $5,000 was all it took to find yourself on the business end of a tax lien. It is also easier for taxpayers to remove tax liens from their property when they are making efforts to repay back taxes. Read here for a detailed discussion of tax relief and liens.

Penalty Relief – The IRS imposes penalties and interest on taxpayers who don’t file or pay on time. These penalties can make up to 40% of a taxpayer’s debt. The good news is the Fresh Start Program includes tools that may help you reduce or remove tax penalties. This includes relief from penalties for not filing a tax return, not paying on time, and not making tax deposits as required.

How do installment agreements and offers in compromise work under the Fresh Start Program?

Installment Agreements – The Fresh Start Initiative now makes it easier for delinquent taxpayers to set up an installment agreement. Taxpayers can obtain installment agreements for up to 72 months online for up to $50,000 of debt without having to provide a financial statement.  Installment agreements are also available for larger tax debts but prepare yourself to provide detailed financial information. Read this to learn more about IRS installment agreements.

Offers in Compromise – Offers in compromise are nothing new. Taxpayers have been able to negotiate a settlement with the IRS since 1998. However, the Fresh Start Program expanded and streamlined the offer in compromise program. One major change is that the IRS only considers the next 12 to 24 months of income when assessing eligibility and calculating the minimum offer in compromise it will accept. Previously it was four to five years.

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 to qualify for IRS Fresh Start Program?

There isn’t one set of requirements to qualify for the IRS Fresh Start Program. Eligibility requirements vary depending on the tax relief program you choose. However, these are the general requirements most tax relief applicants must meet.

Warning: Just because you qualify for a tax relief program doesn’t mean you should apply for it. Tax relief programs sometimes come with strings attached and can cause more harm than good. For instance, applying for tax relief under the Fresh Start Program may require you to agree to extend the 10-year statute of limitations on tax collections or provide self-incriminating financial information. Hire a tax professional to help you decide which tax relief measure is best for you.

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.

Individual tax relief programs have additional requirements. For instance, to apply for a streamlined installment agreement you must owe $50,000 or less. To qualify for an offer in compromise, you must provide detailed financial information by completing IRS Form 433A.

Read this comprehensive tax relief guide to learn more about who qualifies for tax liens relief, penalty abatement, installment agreements, and offers in compromise under the IRS Fresh Start Program.

How to pay off tax debt with an IRS Fresh Start Program?

There are two main ways to repay tax debt through the IRS Fresh Start Initiative: an installment agreement and an offer in compromise. The other tax relief methods are used to reduce or remove tax liens, tax levies, and penalties.

Installment Agreement (Payment Plans) allow you to pay your taxes in full over time. There are four different types of installment agreements:

  • Guaranteed: Tax debts of less than $10,000 repaid in 3 years or less.
  • Streamlined: Tax debts of less than $50,000 repaid within 6 years.
  • Partial Pay: Similar to an offer in compromise. Taxpayers make monthly payments until the time the IRS has to collect taxes expires.
  • In Business: Tax debts of less than $25,000 paid in 24 months or less.
  • Routine: Larger amounts and longer repayment periods.

In 2017, the IRS approved 798,403 installment agreements, which makes it the most widely used tax relief payment option under the IRS Fresh Start Initiative.

An Offer in Compromise is an attractive option for people with large tax debts and little in the way of assets and income. If approved, an offer in compromise can reduce or even remove the tax debt of a delinquent tax. Since 2012, as part of the Fresh Start Initiative, there is no dollar limitation for a taxpayer requesting an offer in compromise. The IRS has also revised financial analysis procedures and increased allowable living expenses to make the program accessible to more taxpayers. In 2017, the IRS approved 25,000 offers with a total value of $256 million.

How to apply for IRS Fresh Start Program?

Each tax relief program under the IRS Fresh Start Program umbrella has a different application route. Some programs you can apply for online and only take a few minutes while others can take up to two years to get approved.

To illustrate, the IRS requires taxpayers, or their tax representatives, to complete a Form 656 and a 433A to start the application process for an offer in compromise. Applying for a payment plan can be done online or by filing Form 9465. Some programs, such as installment programs, have several ways to apply depending on whether you are an employee or a business owner and how much you owe. If you have a large tax debt ($5,000 or more), consult with a tax relief firm before applying for a tax relief program.

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.

Advantages of hiring a tax professional

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.

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.