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Are you in financial difficulty and finding it difficult to pay your upcoming taxes? Consider the IRS fresh start program, that enables you to get relief from your tax debt, and may be forgiven to pay your tax burden.
It is one of the many tax debt forgiveness program offered by the US Internal Revenue Service, to help taxpayer in financial distress. It was started in the year 2011. Thereafter, the program has been further improved, by increasing the types of offers, and the ways of writing your application. The program is far more flexible now, to help struggling taxpayers clear off their tax debt. Changes also include enabling taxpayers to pay their student loans, to pay local and state taxes, increasing the allowable living expense allowance, and revising the future income estimate of the tax payer.
It is for both individual tax payers and small business tax payers. Further, this program also helps the taxpayers to settle their federal liens in tax, different levies that may occur, and further benefits that naturally occur when one is in good standing with the agency. It is called fresh start because it offers a new beginning to the tax payers, as they get relief from back and past due taxes, heavy interests, penalties, increased borrowing capacities, healthy financial statements, and above all, peace of mind and increased confidence at work.
The tax payer can settle his tax debt amount at a lower sum that he is supposed to pay for, if he has an offer in compromise agreement with the IRS. If IRS sees that the applicant doesn’t need financial assistance, or is capable to pay for the tax debt, then they will not offer any OIC. The same applies of the IRS believes that the amount can be settle with a lump sum or payment agreement. (You can find details about these options lower down the page, at payment option) Basically, the IRS studies the applicant’s financial documents and considers its payment capabilities to come to a decision. Thus, all offers in compromise agreements are subject to acceptance of legal requirements.
The objective of developing such a program was to make life less painful for the financially distressed tax payer, while to also increase tax collections for the IRS. A tax payer has to owe the IRS at least 10,000 USD, but less than 50,000 USD, and have also to prove that he does not have means to pay the same in full, or in a reasonable amount of time.
The IRS Tax Relief Program under the Fresh Start Initiative is a series of measures introduced by the Internal Revenue Service (IRS) to help taxpayers who are struggling to pay their tax debts. The Fresh Start Program aims to make it easier for individuals and small businesses to resolve their tax liabilities and achieve a fresh start financially. It consists of several key provisions, including:
Installment Agreements: The Fresh Start Program expanded the threshold for streamlined installment agreements. Taxpayers who owe up to $50,000 in taxes can now qualify for an installment agreement without submitting a financial statement, as long as they agree to repay the debt within 72 months.
Offers in Compromise (OIC): An Offer in Compromise is an arrangement where the IRS agrees to settle a taxpayer's tax debt for less than the full amount owed. The Fresh Start Program introduced more flexible guidelines for calculating a taxpayer's reasonable collection potential, making it easier for eligible taxpayers to qualify for an OIC.
Tax Lien Relief: The Fresh Start Program increased the threshold for filing a federal tax lien. The IRS now generally issues a tax lien when a taxpayer's unpaid balance exceeds $10,000. However, the IRS may still file a tax lien under certain circumstances even if the debt is below this threshold.
Penalty Relief: The Fresh Start Program provides penalty relief for taxpayers who have experienced significant financial hardship, such as a job loss or natural disaster. The IRS may abate certain penalties for eligible taxpayers, reducing the overall amount owed.
Expanded Installment Agreement and OIC Pre-Qualifier Tool: The IRS offers online tools to help taxpayers determine if they are eligible for an installment agreement or an Offer in Compromise.
It's important to note that the Fresh Start Program does not offer blanket debt forgiveness. Taxpayers are still responsible for paying their tax debts, but the program provides more flexible options and relief for those who are struggling to meet their tax obligations.
To take advantage of the IRS Tax Relief Program under the Fresh Start Initiative, taxpayers should proactively reach out to the IRS or work with a qualified tax professional to explore the available options and determine the best course of action for resolving their tax debts.
Definitely yes, if you have a large tax debt with IRS, and you are facing financial stress in paying them off. Moreover, not attending to your tax debt brings in a magnitude of problems and further expenses, and your debt grows in scale, your chance of default increase, your business reputation and your credit worthiness goes down, and you also face the prospect of legal action. Penalties, fines and levies will add up to your debt, and it could spiral up beyond your control in no time. Hence, attending to your tax debt, and setting the same in an amicable manner is always advised.
The taxpayers who have paid or filed all their tax returns, are on limited income, have no major assets and are in need financial help, form the pre requisite to apply for this program
Additionally, you should be in an open bankruptcy filed proceeding, your total tax debt is at or below 50,000 USD, and your total income should be below 100,00 USD (double the amount for couples who are married). For self employed tax payers, your drop in income should be 25% or more. If you are an employer, you should have made all tax deposits for past two quarters, and current quarters as well, to apply.
Please note that, even after meeting all requirements, the final call is on the IRS agency to grant or reject your request of debt forgiveness. It is of tantamount importance that you take help of qualified tax accountant to file your application, unless you yourself are qualified for the job. This increases your chance of getting the relief, and also for your application to take less time on processing.
If your offer in compromise application, seeking tax debt relief gets rejected by the IRS, you are not really at any greater loss. IRS returns your offer application fees, and also apply any offer payment that you included towards your tax balance due.
You also have the option to appeal against the rejection decision, within 30 days of receiving the rejection intimation, by using the Request for Appeal of Offer in Compromise, in Form 13711PDF.
You can download the form by clicking here
The agency looks at 1 year of future projected income for offers of five or fewer months. However, when the offer is made for six to twenty four months, 2 years of projected future income is considered. Please note, two years, or twenty four moths is the maximum limit to pay off all debts, after the offer is accepted.
You tax accountant or lawyer will guide you for the process. Basically, you will have to follow the step by step instructions as published buy them in the compromise booklet, which can be downloaded from the IRS website at https://www.irs.gov/pub/irs-pdf/f656b.pdf.
Thereafter, you will have to fillup the relevant form depending on whether you are an individual or a business. These forms can also be found in the booklet, whose link is given above.
Please note that, as of November, 2022, a separate application fee of 205 USD, non refundable, is to be paid for each Form 656.
Please use the google search box below, mentioning your city or state, or use the links.
When you hire a tax professional to help you file an offer, be sure to check his or her qualifications.
The initial payment that you will make can be selected by you, and your tax accountant should come handy to you, to suggest you the best course of action.
You may submit a proposed initial settlement amount of 20% of your dues along with your offer in compromise application. IRS will confirm you in writing if it is accepted. If IRS settles for an higher amount, then you will be required to pay the balance remaining amount. You may choose to pay the balance amount in upto 5 instalments.
It is similar to the Lumpsum method given above, just that in this method, you also make regular monthly payments to pay off the balance, while IRS agency is considering and evaluating your offer. If IRS accepts, you just need to continue paying your monthly instalments, till such time your tax burden is fully paid off.
For more details, check the Form 656-B, Offer in Compromise Booklet.
Please note that your offer is automatically accepted if the IRS doesn't not make a determination within two years of the IRS receipt date (This does not include period of any appeal).
It is natural to think that just by applying, you may be inviting trouble for yourself. BUT, THIS ABSOLUTELY NOT THE CASE! The IRS is there to help you and to get you back on track, so that you keep contributing to the growth of the nation. They will never penalize you for getting in touch with them, and trying to settle your debt, option of which have been provided by the IRS themselves. So, go ahead!
Need more information? Visit the official IRS website at www.IRS.gov.
