Fresh Start Initiative

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IRS Fresh Start Program

What is the IRS Fresh Start Program?

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:

What are the Repayment Options for the IRS Fresh Start Program?

If you are currently struggling with tax liability, the Internal Revenue Service repayment options may be the right choice for you. These repayment options will allow you to pay off or settle your tax liability legally and sufficiently. Also, this will help prevent any further detriments that would cause any more financial hardships.

Option #1: Offer In Compromise

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.

Option #2: Economic Hardship Installment Agreement Plan

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.

Option #3: Currently Non Collectible (CNC) Status.

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.

Option #4: Streamlined Installment Agreement

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.

What are the Qualifications of the IRS Fresh Start Program?

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.

How Can I Best Take Advantage of the Tax Forgiveness Programs?

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.

How Do I Apply for the IRS Fresh Start Program?

Step1: Gather Documentation

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.

Step 2: Schedule to Meet with a Tax Attorney

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.

Step 3: Fill all IRS Forms

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.

Step 4: Follow Through

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!