Offer In Compromise vs. Fresh Start: The Quick Guide

Are you torn between the IRS Fresh Start program and an offer in compromise? Knowing the difference helps you choose what’s best for your money. This blog will explain both choices and help to pick the right one for you. Whether it’s tax issues or needing a new financial beginning, we’ve got your back.

Let’s dive in and unpack the details of these two liabilities relief programs.

Comparing IRS Fresh Start Program vs Offer in Compromise

So, what’s the deal with the IRS Offer in Compromise and Fresh Start? Let’s break down the nitty-gritty details and compare these two programs side by side.

Definition And Eligibility Requirements

Offer in Compromise (OIC) is like a golden ticket. It allows you to settle your tax liabilities for less than the full amount you owe.

To see if you qualify for OIC, they look at how much money you have and owe. To be considered, you must stay up to date with filing your tax returns and making estimated tax payments.

Fresh Start, on the other hand, is a set of initiatives launched by the IRS to help struggling taxpayers. You can arrange to pay in installments, make a lower payment offer, or get a lien release easily.

To be eligible for this program, you need to owe less than $50,000 in tax liabilities, penalties, and interest. Additionally, you must be able to repay the liabilities within 72 months.

Application Process And Documentation

To apply for an OIC, you must pay a non-refundable fee. Also, submit completed forms and detailed financial documentation. This includes details about your income, expenses, assets, and liabilities. In court, evidence tells a story and supports your case for compromise.

To apply for Fresh Start, you can set up a payment plan or negotiate with the IRS. You might need to provide financial information like:

• Financial statements
• Pay stubs
• Bank statements
• Asset information.

Impact On Credit Score And Financial Status

Now, let’s talk numbers. Both OIC and Fresh Start can provide relief by settling your tax liabilities for less than the full amount. This can give your credit score and financial status a much-needed boost.

Applying for OIC can lower your credit score at first. Finishing a Fresh Start program, like an installment agreement, shows you can handle money. This then contributes to rebuilding your credit.

In the end, both options offer a fresh start (pun intended) to those burdened by tax liabilities. It’s like choosing between different superhero suits. Each has its own powers, but they all lead to the same goal: financial freedom!

Advantages Of IRS Offer In Compromise

1. Reduce your liabilities: You can settle your tax liabilities for less than the full amount you owe. This can provide significant financial relief, especially if you’re facing substantial tax liabilities.
2. Once your offer in compromise is accepted and paid, your tax issues will be resolved. This means you can resolve your tax issues. You can move forward without the burden of unpaid taxes.
3. The IRS has flexible payment options for people seeking an offer in compromise. You can choose to receive a lump sum or make periodic payments to fulfill the settlement.
4. To prevent wage garnishment or property liens, negotiate an offer in compromise. This will help to avoid legal action.

Disadvantages Of Offer In Compromise

1. Meeting the IRS’s eligibility requirements for an offer in compromise can be difficult. Typically, you must prove financial hardship. Or how paying the full tax would cause economic hardship.
2. An offer in compromise can help with tax liabilities, but it might hurt your credit score. The settlement could be reported to credit bureaus, potentially impacting your creditworthiness.
3. After your offer in compromise is accepted, you must follow all tax rules for five years. If you don’t follow tax rules, they might take back the offer.
4. Settlement details are on public record. Anyone can access accepted offers in compromise. This lack of privacy regarding your tax settlement may be a consideration for some.

Before accepting a compromise, examine your financial situation and future goals. This route does offer substantial liabilities relief. However, the eligibility criteria and potential credit implications warrant careful consideration first.

IRS Fresh Start Program

Are you ready to wipe the slate clean with the IRS and start fresh? Let’s dive into the pros and cons of the IRS Fresh Start initiative to see if it’s the right move for you.

Advantages of Fresh Start

1. You may qualify for a reduced tax bill with the Fresh Start program. This can help you manage your financial obligations.
2. The IRS can remove tax liens through the Lien Withdrawal program. This helps you improve your credit and get new lines of credit.
3. With Payment Flexibility, Fresh Start lets you pay off your tax liabilities in smaller amounts over time.
4. If you can join the Fresh Start program, it might help you get an approved offer in compromise. This program offers a potential pathway to settle your tax liabilities for less than what you owe.

Disadvantages Of Fresh Start

1. The program can remove tax liens, but it may still hurt your credit score.
2. Not everyone can join Fresh Start. Meeting the requirements can be hard for some taxpayers.
3. Any accumulated interest is added to the remaining amount, increasing the total repayment.
4. Participating in the Fresh Start program may lead to an IRS audit and scrutiny of your finances.

IRS Fresh Start vs Offer In Compromise – Get the Help You Need

To conclude, the Offer in Compromise and Fresh Start programs both help settle tax liabilities. Yet, they have different requirements and application processes. Before deciding, it’s crucial to understand each program’s details to achieve financial freedom.

To choose the right option for your situation, think about your money and talk to a tax professional.

Here at Innovative Tax Relief, we are here to help. Expert advice is only a phone call away. Schedule a free consultation today!