The Internal Revenue Service (IRS) Fresh Start initiative was instituted to allow taxpayers to pay off substantial tax liability, affordably through specific repayment options, based on their income and the value of their liquid assets.
By utilizing this program, it allows taxpayers to avoid the detriments of having tax liability, including:
Through the IRS Fresh Start Offer In Compromise program, a taxpayer who qualifies may only be required to pay a percentage of the outstanding tax liability owed. The goal of this program is to allow taxpayers to reach a settlement with the IRS when, given their income and asset situation (doubt as to collectability), it would be impossible for them to repay the tax liability in full. In addition, in less common situations, taxpayers may also request a settlement of the outstanding tax liability via the Offer in Compromise program when there is doubt as to the liability or under effective tax administration assertions. It is important to note that submitting an application does not ensure that the IRS will accept your offer. The IRS takes into consideration a number of factors, including your monthly income, allowable monthly living expenses, available equity in assets, etc. If you want to make an Offer In Compromise to the IRS, it is critical that you make a reasonable offer, one that precisely reflects your financial situation. Therefore, it would be wise to contact a tax professional to assist in the submission of your offer.
If you do not qualify for an Offer in Compromise, you might qualify for an IRS Fresh Start Economic Hardship Installment Agreement. If you do not have the ability to make a large enough monthly payment that would pay off your tax in full within the ten year collection statute, generally beginning on the date that the IRS assessed the tax balance as owed, then the IRS might allow you to make smaller monthly payments. However, like the Offer in Compromise, the IRS takes into consideration a number of factors, such as your monthly income, allowable monthly living expenses, available equity in assets, etc. If you want to request an Economic Hardship Installment Agreement from the IRS, you need to provide detailed financial information to the IRS, and therefore, it would be wise to contact a tax professional to assist in the submission of your request.
If you are in economic hardship and you do not have the ability to make any payments to the IRS, then the IRS may temporarily place your account into “CNC Status” and suspend collection actions against you. Generally, the IRS seeks updated financial status every two years in order for a taxpayer to remain in CNC status, but they do reserve the right to resume collection activity at any time. Fortunately for taxpayers, the 10 year collection statute will continue to run while they are in CNC status.
The IRS Fresh Start Streamlined Installment Agreement allows you to quickly set up an Installment Agreement with the IRS to repay back taxes over a fixed period with a fixed monthly payment, usually without providing financial information. There are three types of streamlined Installment Agreements: 1) 36-month repayment for balances of $10,000 or less, 2) 72-month repayment for balances of $50,000 or less, and 3) 84-month repayment for balances between $50,000 and $100,000. Options 1 and 2 can be set up online and since they do not require the IRS to file a Notice of Federal Tax Lien (NFTL) they have become increasingly popular. Option 3 is more stringent, specifically the taxpayer must agree to payment via automatic ACH or payroll deduction, and in this case, a NFTL would be filed. Taxpayers should also note that the fixed monthly repayment periods stated above are based on a full 10 year collection statute. The IRS will shorten these periods based on the remaining time on the collection statute. For example, if a taxpayer has only 12 months left on the collection statute, they would be required to repay the balance in 12 monthly installments, not 36 or 72. A tax professional can help determine which plan best suits your case.
This program generally is available for both business tax liability and individual tax liability, with the exception of the streamlined Installment Agreements, which are only available to individuals.
Tackling tax issues on your own may inhibit your ability to take full advantage of the program. The best IRS Fresh Start results can be achieved by consulting a tax professional. They understand all the ins and outs of the program and can provide meaningful insight to assess your situation. Also, they can aggressively negotiate on your behalf and possibly settle your liability for far less than what you originally owed.
It is important that you gather all tax documentation from the years in question. With these documents, you can successfully navigate through your tax liability. Also, it will inform your tax attorney on how to best approach your case.
By hiring a tax attorney, you can make the process of applying for the IRS Fresh Start program much easier. Understanding the rules, regulations, and requirements on your own can be overwhelming. A tax professional will communicate with the IRS, on your behalf, to negotiate a manageable solution. This will often involve a significant reduction in tax liability while also reducing the chances of wage garnishments, property seizures, etc.
Once your tax expert determines which plan is right for you, he/she will ask you to fill out the required Internal Revenue Service (IRS) documentation. These forms can all be found on the IRS website.
Keep an open line of communication with your tax professional and follow through on your responsibilities to obtain your financial freedom!
Contact our team of tax professionals for a free consultation to learn more about the Fresh Start Program and see how much you can save!
Coast One allowed me to have peace again. I was in tax liability over my ears and saw no way out...
In 2008, the first year of the Great Recession, our entire economy was collapsing! Businesses were laying off workers and homes were being foreclosed upon in numbers not seen since the Great Depression! At the federal government, there was a call for all hands-on deck to address this emergency! People were unable to timely pay their taxes due to unemployment, home foreclosure, and financial hardship. The IRS contribution toward addressing this crisis was the Fresh Start Program. In 2012 the IRS retooled this tax relief program to make it easier for taxpayers to obtain tax relief. This retooled federal tax relief program was rebranded as the Fresh Start Initiative.
What exactly is the Fresh Start Initiative, and what does it do? The Fresh Start Initiative is designed to help taxpayers unable to pay their back taxes due to financial hardship. The Fresh Start Initiative is a group of separate IRS programs, consisting of the following:
It boils down to your total monthly income verses your total IRS allowable monthly expenses. The basic individual work sheet or Financial Statement used to list these is the IRS Form 433-f. The IRS Form 433-f can be downloaded via the internet. However, it is not the only one – the IRS Form 433-a is more detailed, as is the 433-b for businesses. Do your total IRS allowable monthly expenses equal or exceed your total monthly income? If so, do you NOT own any real property or assets or do you own any real property that has no equity? If this is the case, then you might qualify for an Offer in Compromise, Economic Hardship Partial Payment Plan or Currently Non-collectable (CNC) Status.
Under the Offer in Compromise program, the taxpayer offers a lump sum in settlement of the tax liability. The offer amount is less than the total tax owed. The offer amount is based on detailed financial forms submitted to the IRS. By collection statute, the IRS has approximately ten years to collect the back tax owed (the CSED Date). Under an Installment Agreement, you make monthly payments to pay off your tax within extended timeframe. What if you cannot afford the monthly payments necessary to pay off your back taxes in full within ten years or within CSED? Under the Economic Hardship Partial Payment Plan, you only make a monthly payment that you can afford. Therefore, when approved for a Partial Payment Plan, your monthly payments may not pay the full amount of your total tax within CSED. After the CSED date has passed any remaining tax may be written off and reduce to zero. This is why in industry jargon the Economic Hardship Partial Payment Plan is called a back door OIC. Just as with the OIC, for an Economic Hardship Partial Payment Plan you must submit detailed financial forms. Does your financial Statement and supporting documents show you are in hardship? E.g., are your IRS allowable monthly expenses equal to or greater than your monthly income? Do your supporting documents show zero available equity in your assets or inability to borrow against your assets? In other words, do you not have the ability to pay anything at all to the IRS? If this is the case, the IRS may agree to classify your case as Currently Non-Collectable (CNC) Status. As long as your case is in CNC Status, the IRS will not take any collection action against you. After the CSED date has passed, your tax balance may be written off and reduced to zero.
However, even in this very basic example, nothing is simple when it comes to taxes. First, not all monthly living expenses are allowable by the IRS. Certain monthly living expenses, such as how much rent you can list, are capped by IRS National Standards. Monthly rent is based on the county you live in and the number of people in your household. The IRS National Standards are available via the internet. Get the picture? Unfortunately, resolving a tax problem is seldom easy. If you own real property and you have equity in your property, things become even more complicated. So, which Fresh Start Initiative Program is best for you? You can review IRS Form 433-f with an IRS Recognized Representative to get an idea.
IRS Recognized Representatives can represent taxpayers before the IRS. An IRS Recognized Representative is either an attorney, a Certified Public Accountant, or an Enrolled Agent. An Enrolled Agent is a person who has passed the IRS Special Enrollment Examination (SEE) and is privileged to represent taxpayers before the Internal Revenue Service.
Coast One Tax Group is a company knowledgeable in all Fresh Start Initiative Programs. We are a group of IRS Recognized Representatives – attorneys, accountants and Enrolled Agents. My colleagues and I work hard to obtain the best tax resolution (settlement) possible for our Clients! Regarding OICs we submitted, last year (2020), on average, we saved our clients a minimum of 93.2% of the amount of back taxes owed, and we have substantiated claims to prove it! Unfortunately, we cannot win them all. We cannot guarantee, for example, that ultimately the IRS will grant your specific Offer in Compromise. However, we will never submit an OIC unless it is a strong case. If you do not have a strong OIC case, we will tell you. And, we will find the best Fresh Start Initiative Program that you do qualify for!
How can Coast One Tax Group help you today? Need a second opinion? Give us a call, or drop us a text or an email!