What Is The IRS Fresh Start Program?
The IRS Fresh Start Program was initially created in 2012 in order to assist individuals and businesses who owed back taxes, making it easier for taxpayers to pay their outstanding tax balances while avoiding tax penalties and liens. Since its initiation, the Fresh Start Program has been expanded to include additional features, such as the ability for some taxpayers to settle outstanding federal tax debts for less than what was originally owed, and also modified thresholds that may allow a greater number of taxpayers to be considered eligible for benefits under the program.
If you’re wondering “Do I qualify for the IRS Fresh Start Initiative?”, call one of our tax experts for a free consultation. We’ll help you determine eligibility for the program.
What Features of the IRS Fresh Start Tax Relief Program Can Help Me As A Taxpayer?
The IRS Fresh Start Program combines a number of features designed to help taxpayers who owe back taxes. This includes:
- Tax penalty relief – Qualifying taxpayers can petition to have tax penalties waived for six months. This means that rather than immediately being charged a failure-to-pay penalty for missing a tax payment by April 15th, the payment period is extended until October 15th without incurring a penalty. If outstanding tax balances are not paid by October 15th, late payment penalties will then be charged. To qualify, individuals must be able to show they were unemployed for at least 30 consecutive days during the tax year, or if self-employed, that their business income decreased by at least 25%. Individuals cannot earn more than $100,000 per year (for married couples filing jointly, that figure goes up to $200,000 per year) and cannot have an outstanding tax balance over $50,000. Note that although penalties may be waived, interest still accrues on unpaid taxes.
- Installment payment plans – The Fresh Start Program increased the maximum threshold for taxes owed in order to qualify for a streamlined installment payment program. Prior to the initiative, the maximum outstanding amount that still allowed a taxpayer to qualify was $25,000, but the Fresh Start Initiative increased the maximum to $50,000. The Installment agreement program provides taxpayers with six years to pay off outstanding tax debt in monthly direct debit installments. Taxpayers owing more than the $50,000 maximum may still set up an installment agreement but must either pay off part of their overdue tax balance to bring it under the $50,000 limit or must file a Collection Information Statement (Form 433-A or Form 433-F) and provide the IRS with a financial statement. The easiest way to apply for an installment payment plan if you meet qualifications is to use the Online Payment Agreement tool at IRS.gov or file Form 9465 (Installment Agreement).
- Tax lien filing and releases – The IRS can file a notice of federal tax lien when taxes owed have not been paid by the taxpayer. Prior to the Fresh Start Program, an IRS Notice of Federal Tax Lien could be imposed when outstanding taxes exceeded $5,000. That amount under the initiative was increased to $10,000 before a tax lien is filed, although the IRS can still impose a lien for less than that amount if it determines that circumstances surrounding the unpaid taxes warrant doing so. Once a federal tax lien is filed, it alerts creditors that the federal government has a legal right to a taxpayer’s “property”, including vehicles and real estate owned, as well as other financial assets. The lien can negatively impact the ability to obtain credit. If a federal tax lien has already been filed by the IRS and the taxpayer meets certain requirements of tax debt repayment, the taxpayer can file Form 12777 (Application for Withdrawal) to request that the lien be released by the IRS.
- Offer in Compromise – An Offer in Compromise allows taxpayers to settle federal tax debts for less than what is owed in either a single lump-sum payment or in installments. Prior to the IRS Fresh Start Program, it was very difficult to qualify for this type of tax relief but the Fresh Start Initiative loosened the standards for determining eligibility by the IRS, making the program available to a greater number of taxpayers. An Offer in Compromise offers tax relief in situations where it can be demonstrated that the taxpayer is unlikely to be able to pay the full amount of taxes owed within a reasonable time period or if it can be shown that paying the full amount would create an undue financial burden on the taxpayer. In order to be eligible for the Offer in Compromise tax relief, taxpayers must have filed all required tax forms and paid current year taxes in full. Taxpayers cannot have an open bankruptcy petition (personal or business) and if the taxpayer is a business owner with employees, current quarterly tax payments must have been made. To apply for an Offer in Compromise, Form 433-A (OIC) or Form 433-B (OIC) must be submitted to the IRS, along with an application fee (unless the taxpayer is exempt from paying the application fee under the Low Income Certification guidelines). In addition, payment of the first proposed monthly installment or 20% of the proposed lump-sum payment amount must accompany the application. Several factors are considered when determining whether taxpayers are eligible for an Offer in Compromise.
Not sure if you are eligible for the IRS Fresh Start Program? Call us today to schedule a free consultation with one of our tax experts.
Do I Qualify For The IRS Fresh Start Program?
Many taxpayers wonder if they are eligible to take advantage of tax relief measures offered by the IRS Fresh Start Initiative Program. To determine eligibility, taxpayers must consider the following:
- Has the taxpayer been unemployed for at least 30 consecutive days during the tax year?
- Can a self-employed taxpayer show that net income decreased by at least 25% during the year?
- Does an individual taxpayer earn more than $100,000 per year? Or if married filing jointly, does the couple earn more than $200,000?
- Is the outstanding tax balance owed greater than $50,000?
Do you qualify for the IRS Fresh Start Initiative? Call one of our tax experts for help in determining eligibility under the program.