What is the IRS Fresh Start Program?

The Inland Revenue Service (IRS) Fresh Start Program is a term for the IRS's debt relief programs. The program aims to make it easier for people to lawfully resolve their tax obligations and penalties. Some methods may be able to help you lessen or suspend your debt.

The Fresh Start Program consists of a number of tax law adjustments. It provides several levels of relief and reimbursement choices depending on the applicant's financial status.

In 2011, the IRS started the Fresh Start project with the goal of assisting more taxpayers in regaining a strong position.

Rather than imposing penalties, the program focuses on promoting fair repayment options.

Taxpayers benefit because they may be able to avoid liens, levies, wage garnishments, and jail time as they pay off their debts.

The program was created to provide first-time tax offenders a chance to make amends.

It allows taxpayers to pay off their tax debts over the course of six years by making monthly payments depending on their current income and liquid asset worth. Most of the time, they are able to pay off all of their outstanding debts within 6 years.

The initiative essentially assists people in paying off their large tax debts by:

  • Streamlining and increasing the qualifications for the Office-In-Compromise (OIC) program to make it more accessible to taxpayers.

  • Installment Agreements for small businesses are simple to obtain.

  • FIL withdrawals are made more frequently for taxpayers who engage in a Direct Debit Installment Agreement.

  • When you pay off your debt, you get an easy FTL release.

  • Raising the threshold for generating Federal Tax Liens (FTLs) from $5,000 to $10,000. It was eventually raised to $25,000, which resulted in a decrease in FIL filings.

In 2012, the Fresh Start Initiative was updated to make it more accessible to more taxpayers. The following changes were made:

  • Increasing the types of expenses and quantities that the IRS considered fair when determining how much individuals could easily pay each month, such as student loans, certain tax debts, and affordable living expenses.

  • Streamlining the IRS's approach to determining a taxpayer's future income while taking OICs into account.

Repayment options for the IRS Fresh Start Program

The program provides taxpayers with three repayment choices to help them clear their tax arrears lawfully and successfully. It also aids them in avoiding future penalties and interest, which can lead to financial difficulties.

They include the following:

Extended Installmental Agreement

This is the first alternative accessible to taxpayers who owe the IRS $50,000 or less. They have a maximum of 6 years to pay off their loan without any further fines or interest.

There will be no extra IRS fees to pay, such as tax liens, wage garnishments, or the possibility of having their assets taken.

Most taxpayers choose this option, which determines the monthly payment amount depending on the taxpayer's current income and the value of their disposable assets.

The IRS sets manageable payment levels to ensure that payments are made on time and without difficulty.

Offer in Compromise

This is the second option, which is uncommon but nonetheless available to taxpayers who owe the IRS money. In this situation, the taxpayer proposes to pay less than the full sum owed, and in some cases, substantially less than the full amount owed.

If you intend to use an OIC to pay off your debt, it's critical that you make a realistic offer that reflects your current financial condition. This is a less popular option among taxpayers.

It is, therefore, better to employ a tax professional to fill out documents and, in general, assist you in preparing and submitting your proposal to the IRS on your account.

Tax professionals will assist you in completing the necessary IRS forms. They will also supply precise financial reports to aid in the acceptance of your OIC application.

Tax Lien Withdrawal

This alternative is for taxpayers who are willing to pay off their entire debt via direct debit. In this scenario, the taxpayer might give written instructions for the money to be taken straight from their bank accounts.

Those who receive the transaction should avoid mentioning it to the credit bureaus as much as possible.

Who are those that qualify for the program?

Those who qualify for the program are those who are willing to pay their tax burden in installments over a set period of time, as determined by a repayment plan.

The following are the other requirements for qualification:

  • Not having previously fallen short on IRS tax payments.

  • Taking the responsibility for adhering to the installment agreement, submitting taxes on time, and not accruing any more debt during the term of the installment agreement.

  • Capable of paying off the debt in less than 5 years.

  • Having an IRS debt of $50,000 or less, or the ability to repay the majority of the amount.

  • Being up to date on their tax filings for the current fiscal year.

  • Ready to pay according to the direct payment system.

  • Filling out an OIC application and paying the agreed-upon fee within a year.

Taxpayers who are eligible for the Fresh Start Initiative will receive the following benefits:

  • Some fines for first-time taxpayers may be waived.

  • If their debt is less than $25,000 or if they can pay a reduced starting liability, they can have a federal tax lien lifted.

Unemployed taxpayers may have their IRS fines disregarded if they have been unemployed for more than a month. They can also request an extended 6-month grace period to file and pay taxes without incurring costly IRS penalties.

Applying for the IRS Fresh Start Program

For all previous and existing tax returns, those applying for the IRS Fresh Start Program must follow the IRS's guidelines.

If you have any pending tax returns that haven't been submitted, you won't be able to request a repayment option. To be eligible for the Fresh Start Program, you must also be timely in filing all subsequent taxes.

If you don't wish to enroll online, you can always fill out and submit an IRS Form 9465, which is available on the IRS website, to make a proposal for the IRS Fresh Start Program.

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