Nov 2, 2024 Current Resources

The IRS And The Fresh Start Initiative: What You Need To Know

(TheDailyCurrents.com) – Sometimes an individual or small business ends up with back taxes. Often, they can end up with many years of back taxes. As the debt grows, so does the potential for tax liens as the IRS continues its attempts to collect the debt. This can become a financial burden and cause numerous hardships. Fortunately, there is a way for struggling taxpayers to find relief from back taxes through the IRS. Learning more about the Fresh Start Initiative can help you determine if it is a feasible option for your situation.

What is the Fresh Start Initiative?

The IRS Fresh Start Initiative is a program designed to make it easier for taxpayers, both individuals and small businesses, to pay their back taxes. It also makes it possible to avoid potential tax liens or to have them withdrawn. The Fresh Start program has three essential components that interested individuals should understand.

Tax Liens

A Notice of Federal Tax Lien may be filed on amounts for less than $10,000, but generally, that amount has been increased to $10,000 or more due to the Fresh Start program. If taxpayers pay off their tax debt and meet specific requirements, they can request in writing through Form 12277-Application for Withdrawal that the Notice of Federal Tax Lien be withdrawn. Additionally, taxpayers may qualify to have their lien notice withdrawn if they are participating in a direct debit installment agreement, but they must also apply with Form 12277. However, it is essential to know that if you default on the installment agreement, you may receive a new Notice of Federal Tax Lien.

Installment Agreements

The expansion of the Fresh Start program gave more access to installment agreements, which allows taxpayers to make monthly direct debit payments for up to 72 months on up to $50,000. You may need to provide some financial information to the IRS. You can apply directly through the IRS website using their Online Payment Agreement tool or use Form 9465-Installment Agreement. Individuals who owe more than $50,000 or need to pay longer than six years will need to provide financial statements to the IRS.

Offers in Compromise

Another option for finding relief from back taxes is an Offer in Compromise. This agreement allows the taxpayer to settle their outstanding debt for less than the total amount owed. The IRS has flexibility when analyzing a taxpayer’s ability to repay their taxes, but it will usually not accept an offer if it believes the taxpayer can pay in full as a lump sum or through a repayment agreement. However, it is sometimes a feasible option for those who cannot pay their tax liability or would face financial hardship by doing so. When determining if you qualify for an Offer in Compromise, the IRS looks at several factors, such as your ability to repay, income, expenses, and asset equity. It will generally accept if they believe it is the most they can expect to collect in a reasonable amount of time.

Finding Tax Relief Through the IRS

The best way to determine your eligibility and to find potential tax relief is through the IRS. While there are companies that claim they can help you find financial relief, many companies make false claims or simply do not understand the intricacies of the IRS code. Applying directly through the IRS for the Fresh Start Initiative will most likely save you time, fees, and frustration. Additionally, the IRS has a variety of tools and tips to assist taxpayers with their tax obligations.