The IRS Fresh Start Program – A Beginner’s Guide
We can all agree that finding your way through the maze of tax obligations can prove a challenge; it’s like pulling teeth. And for most of us, unforeseen financial issues are enough to end up drowning in increasing tax debts, leaving you helplessly trapped in a web of worries.
Well, that’s where the IRS Fresh Start Program comes in—serving as a lifeline meant to give both individuals and businesses another shot at financial stability. How great!
That’s what we intend to explore in this in-depth guide. We will look into the program’s complexities, shedding light on what it is, who qualifies, the different payment plans available, the application process, and more.
By the end of this publication, you’ll have armed yourself with the information you need to forge a path to financial recovery. And guess what? We would love to walk it with you if you let us.
Let’s get right into it already, shall we?
What Is the IRS Fresh Start Program
As opposed to the common presumption the IRS Fresh Start Program is not a new initiative. The program dates back to 2011 when it arose as a way out for people grappling with tax bills but with no federal tax liens.
The program, which was primarily designed for first-time tax offenders, allows individuals to straighten out their financial trajectory by stretching their tax repayments over a manageable period, usually six years. How? The payment structure is tightly connected to current earnings and liquid asset value, promoting a long-term debt-clearance strategy.
One of the program’s key aspects includes increasing the threshold for triggering Federal Tax Liens (FTLs) from the initial $5,000 to an eventual $25,000. This strategic decision resulted in a major reduction of FTL filings, leaving taxpayers with a more lenient framework. More importantly, the initiative grants more frequent withdrawals for taxpayers who enter Direct Debit Installment Agreements, speeding up the resolution process.
But the program’s foresight doesn’t end there but rather extends to small businesses through Installment Agreements that are easy to obtain. In addition, through lowered standards and broadened considerations for various expenses, such as student loans and affordable living expenses, the Office-In-Compromise (OIC) program, which makes a powerful debt resolution tool became more accessible.
Then comes 2012, and some changes are implemented to fine-tune the program even further, catering to a broader range of taxpayers. This was achieved by increasing allowable expenses and simplifying income calculations for future considerations.
Who Qualifies for the Initiative?
Before we get into who qualifies, it’s important to mention that the IRS Fresh Start Program isn’t a charity, and to benefit from it you must meet specific criteria.
You’ve got to prove to the IRS how settling your tax balance would impose severe financial hardship for you to be deemed eligible. And that is, to say the least. The IRS will then assess the severity of your situation to determine the nature of the tax program best suited for you.
Now, to the specifics, the following are the essential qualifications:
- First and foremost, you are required to have filed your tax returns for each of the past three years.
- Taxes, including interest and penalties, should not exceed $50,000. If you owe over $50,000, you must first lower your debt to $50,000 or less before you sign up for the program.
- You cannot take part in any tax evasion or criminal activities.
- You must have made all required projected tax payments for the present financial year.
- You must commit to paying your due tax debt within six years.
IRS Fresh Start Program Payment Plans
As mentioned earlier, the IRS Fresh Start Program offers several payment options, all designed to help taxpayers clear their owed taxes and enjoy a fresh start. Let’s delve deeper into each one of them.
Offer in Compromise (OIC)
You’ve got to know that this is a rare option, mostly because of strict qualifications. But that doesn’t mean it’s unattainable. Offer in Compromise or rather OIC, is a payment option that allows taxpayer to settle their debt for a lower amount than the total they owe, making it arguably the best deal one may get.
To qualify for an OIC, the IRS will need to thoroughly assess your income, expenses, and assets. But first, you’ll need to present to the IRS a fair offer that reflects your current financial situation for it to work.
Owing to that reason, you’re better off hiring a tax professional to help you fill out the necessary documents, as well as prepare and submit the offer for you. They will also help you complete and file the relevant IRS forms, not to mention present accurate financial records to help your case go through quickly.
Installment Agreement
Another available option you may consider is the Installment Agreement, often suitable for taxpayers owing $50,000 or less in tax debt.
In this arrangement, one is offered a 6-year loan repayment window without incurring more interest or penalties. You also won’t need to pay any extra IRS fees, such as wage garnishments, tax liens, or the possibility of having your assets seized.
While the arrangement sounds quite reasonable, you must negotiate for a manageable payment. That’s where our seasoned tax attorneys can jump in; to help you secure the lowest installment you can get. Or, even help you utilize the statute of limitations, which could potentially see some of, if not most of your debt expire. Yes, expires. Imagine that!
Currently Non-Collectible Status
Currently Non-Collectible Status stands out as a unique approach among the various payment options available. Unlike the other options, it doesn’t offer relief in the form of settlement or lower installments but rather grants you a protective “status” umbrella. So, if you’re having a hard time meeting your tax obligations, you may request the IRS to issue you a Currently Non-Collectible Status.
While this classification doesn’t do away with your tax liability, it does effectively put a stop to any pending collection attempts. Bank levies, wage garnishments, tax liens, and threatening IRS letters are all put on hold, affording you some breathing room, at least until you regain some financial stability. Not bad at all. But once your Currently Non-Collectible status expires, expect the IRS to resume their threatening penalties, phone calls and letters, and other collection efforts.
However, before seeking this status from the IRS, we strongly advise you to consult with tax experts like Cumberland Law Group. If you apply for the status on your own, chances are the IRS will attempt to convince you to accept conditions that are more favorable for them. Nobody wants that, except maybe for the IRS.
Penalty Abatement
Penalty Abatement comes out as an effective means of easing the burden of IRS-imposed penalties. This approach involves lowering or eliminating penalties in a bid to offer taxpayers some tangible relief. However, it is important to point out that the IRS maintains discretion when looking to enforce Penalty Abatement, and can only grant it for valid reasons.
The process for requesting Penalty Abatement is absolutely free and can be done at many levels of IRS collections, from federal IRS campuses to local IRS offices and even automated collection systems. Local IRS offices, in particular, can only give abatements of up to $100 and are therefore a viable option for those seeking relief on a more modest scale.
Applying for the IRS Fresh Start Program
As mentioned before, the IRS doesn’t just grant tax relief to everyone who asks for it. To have a successful journey to financial recovery, you’re going to need thorough preparation and, more importantly, a solid base of evidence.
The thing is, the IRS is concerned with the legitimacy of requests, for which reason taxpayers are required to present extensive proof to support their case. So, when submitting a request, try to include as much information as possible to demonstrate your compliance with the stringent qualifications of the Fresh Start Program.
Medical statements, fire department reports, insurance claims, student loan statements, and even death certificates of family members are examples of essential documentation. A well-crafted letter accompanying your Form 843, in addition to these documents, can provide a piece of your personal background information and situation, explaining why resolving your due tax debt is a major challenge.
And that’s not even everything. You need to meet other criteria if you wish to present a compelling case to the IRS and secure tax relief under the Fresh Start Program. This includes submitting all missing or unfiled tax returns, ensuring accurate projected tax payments, and verifying the correctness of current withholdings.
In all honesty, applying for the IRS Fresh Start Program is a daunting task, and bringing on help from Cumberland tax attorneys might be a wise decision. Even if the IRS initially denies your claim, our attorneys can lead you through the appeals process, increasing your chances of getting the tax relief you want.
How to Apply
So, how do you apply for the IRS Fresh Start Program? Well, here are the steps to follow:
- Write a Letter – Begin by declaring your interest in enrolling in the Fresh Start Program in a formal letter addressed to your regional IRS office. Be sure to describe your current financial condition and outline the grounds for seeking tax relief in detail.
- Fill out IRS Form 843 – Include a completed IRS Form 843 alongside your letter. This form is an official request for penalty abatement and should include specific information about your outstanding tax bill and the amount of relief you seek.
- Provide Supporting Documents – Cement your argument by offering any supporting documents you may have. Insurance claims, death certificates for family members, medical statements, layoff notices, and any other proof that backs up your financial hardship may come in handy.
- Ensure Compliance – Confirm that you have completed all additional requirements, such as filing all missing or unfiled tax returns, etc.
- Consider Seeking Expert Help – There’s no denying that hiring competent tax attorneys such as Cumberland Law Group might increase your chances of being approved and speed up the application process. Their knowledge can help you get around the complexities surrounding the application and, if necessary, the appeals process.
Frequently Asked Questions on the IRS Fresh Start Program
Are there any penalties associated with using the Fresh Start Program?
No. The IRS will not penalize you if you try to work with them to settle your tax obligations.
If you are uneasy or concerned about facing penalties, consult with a tax attorney before reaching out to an IRS agent. An adept tax attorney will help you fully understand your rights as a taxpayer, your options, and the best way to proceed.
Is the Fresh Start Program credible?
We get it, you’re probably thinking “Is this program even legit in the first place?” Or maybe you just find it to be too good to be true!
Well, hold your hoses. The IRS Fresh Start Program isn’t some sort of scam and is entirely legitimate.
Is the IRS Fresh Start Initiative a good idea?
Absolutely yes! It’s safe to say the IRS Fresh Start Program is a win-win for everyone. The IRS wins because they will collect some payment, which is better than being ghosted by the taxpayer.
The taxpayer, on the other hand, benefits because they will once again be in good standing with the IRS, which means they will avoid levies, liens, wage garnishments, fines, and other penalties.
Fresh Start Program’s Final Call to Freedom
Amidst the complexities of tax settlement, the Fresh Start Program comes out as a beacon of hope, offering tailored solutions to individuals and businesses overwhelmed by tax arrears.
But as we’ve mentioned in this article, this tax relief isn’t a charity, and qualifying for it requires thorough preparation and substantial evidence, among other requirements. Navigating these waters isn’t child’s play and it would be best if you enlist the help of a competent sidekick such as Cumberland Law Group to help you forge a roadmap to financial stability.
So, no need to stall any longer. Contact us today for a free consultation and begin your journey to financial recovery. Your Fresh Start awaits!