What is the IRS Fresh Start Program: An Introduction

The IRS Fresh Start Program is nothing new. The program dates back to 2011. It gives taxpayers and small businesses burdened with first-time tax liability an opportunity to get out of liability while also avoiding tax liens.

Over the years, it has undergone significant changes. The majority of the provisions outlined in the initiative are designed to make applying for tax relief programs. It also makes paying back taxes much easier.

If you have tax liability, you’ve probably come across the IRS Fresh Start Program on TV or radio.

Do you qualify for it? How can the Fresh Start Program help you get a second chance to get back on track with your taxes? What does it include? We will answer all these questions, and more, starting now.

Is The IRS Fresh Start Program Real?

Yes, the IRS Fresh Start Program is a legitimate initiative by the Internal Revenue Service. It aims to help taxpayers resolve their tax issues and achieve a fresh start with their tax obligations.

The program provides options for payment plans and offers in compromise to eligible individuals. This includes businesses who are struggling to pay their taxes. If you qualify, you could potentially reduce the amount of tax you owe. You can then get on a more manageable path towards tax compliance.

How Does the IRS Fresh Start Program Work?

The Fresh Start Program issometimes referred to as the “IRS second chance program”. It was created by the IRS to help taxpayers that owe back taxes. In 2011, it was a prerequisite for them (taxpayers) to have no federal tax liens filed against them. The IRS Fresh Start liability resolution program was focused on the following:

• Making it easier to obtain a Federal Tax Liens (FTLs) release right after paying the liability.
• Enabling small businesses to obtain Installment Agreements (IAs) easier.
• Allowing an individual taxpayer that entered into DDIA (Direct Debit Installment Agreement) withdraw Federal Tax Liens more frequently.
• Making it easier for more taxpayers to qualify and use the Offer-in-Compromise* program. The program works by expanding and streaming the qualifications of the particular initiative.
• Lessening the number of Federal Tax Liens being filed by increasing the dollar amount that caused FTLs being filed. Dollar amounts have increased from $5,000 to $10,000 (a few months later, it was raised to $25,000).

In 2012, the IRS Fresh Start tax program was further expanded. Thus allowing even more financially distressed taxpayers to qualify for IRS Fresh Start program enrollment. . Part of the reforms targeted real-life situations that typically cause individuals to fall behind on their taxes.

The IRS Fresh Start Program revisions expanded what expenses count toward program eligibility. This helps determine the money a taxpayer can afford to pay every month. Among these were local and state tax liabilities, student loans, and allowable living expenses.

The IRS Fresh Start relief program expanded to help those struggling the most with financial hardship. It helps to clear up their liability faster than in the past.

Today, the IRS is flexible about predicting their future income. Especially if a taxpayer is looking into the Offer-in-Compromise (OIC) program, This makes it easier for a taxpayer to qualify for an Offer-in-Compromise.

About the Offer in Compromise Program & Reasonable Collection Potential

An Offer-in-Compromise is a program that enables taxpayers with due tax liability to come into an agreement with the IRS. Their tax liabilities are then settled for less than the total amount they owe.

For a taxpayer to be able to clear their liability via the Offer-in-Compromise program, the IRS should first calculate the taxpayer’s income and assets. They will then determine the reasonable collection potential. This refers to the amount of money the IRS determines a taxpayer can pay for his/her tax liabilities. It is basically their monthly disposable income and the liquidation value of their assets.

The IRS now calculates a taxpayer’s collection potential by looking into 12 months of future income. This is down from four years for offers paid in less than five months. And two years of future income (down from five years) for offers paid in 6-24 months. This gives some taxpayers the opportunity to have their tax issues resolved in 48 months, when, in the past, they would need 4-5 years.

The three prevalent types of Offer in Compromise are:

• Doubt as to Collectibility – Enacted when you owe back taxes that are impossible for you to pay back. Even if you sold all of your assets.
• Doubt as to Liability – You can dispute your tax liability provided that there is a relevant legitimate disagreement in argument, law, or facts.
• Effective Tax Administration – Applies when the collection of tax liability will generate considerable economic hardship for you in the future. So, you may be able to pay your tax liability, but doing so will put you in financial strain in the long run. In this case, the IRS may settle your tax bill.

How Does the IRS Fresh Start Work?

Besides Offers in Compromise, the IRS Fresh Start initiative can contribute to delivering further benefits:

• Tax lien avoidance – Under the IRS Fresh Start program tax liens are NOT filed for liabilities less than $10,000. Except for cases when the penalties and back taxes surpass $10,000. This helps avoid the negative effects of tax liens. For instance, attach the lien to all the assets of the in-liability taxpayer until they repay their liability). The IRS may also help withdraw a tax lien notice if one is filed under specific circumstances:
  • (1) you pay for your liability via a low-user-fees Direct Debit installment agreement. This is where you agree the IRS automatically makes monthly payment withdrawals from your checking account or
  • (2) pay your liability and remain current with all the estimates tax filings and payments.
• Installment agreements & penalty relief – The Fresh Start program helps avoid some tax penalties. They do this by increasing access to streamlined installment agreement with the IRS. Taxpayers can choose between five types of installment agreements. These are dependent on the tax liability owed (for less than $10,000 to over $25,000) and the repayment period (between 3 years or less and longer than 24 months).

Other important changes in the Fresh Start Program:

• For on-going businesses, the IRS no longer includes equity in income-producing assets in their calculation of reasonable collection potential.
• The Fresh Start program now has clearer rules. It decides when a dissipated asset counts in the collection potential calculation.

In the end, it is best to consider the Fresh Start Program more of a tax relief toolbox rather than a singular form and enrollment. The initiative now includes a set of measures designed to help small businesses and individuals. This helps them to rectify their tax problems and get second chance.

Do I Qualify for the IRS Fresh Start Program?

Some of the general eligibility requirements the majority of tax relief applicants must meet are as follows:

• Small business owners and self-employed workers must make all necessary estimated tax payments for the current year.
• Business owners with employees need to make all required federal tax deposits.
• You need to prove that you are unable to pay your tax liability because you lack assets or money.
• You should not be involved in an ongoing proceeding for bankruptcy.
• You must file all tax returns as obliged by law, even if you are unable to pay them.

Different tax relief programs have extra requirements to consider when applying. For instance, if you are applying for an Offer in Compromise, you need to complete specified IRS forms (see below). You will be called to provide detailed financial information.

On the other hand, a streamlined installment agreement requires that you owe less than $50,000 or that you:

• Can pay a larger liability down to $50,000.
• Have ensured your tax filings are up-to-date through the current tax year.
• Have not fallen behind on tax payments with the IRS in the past.
• Can pay off the remaining liability in up to 5 years (60 months or less).
• Don’t incur new tax liability during the installment agreement period.
• Stay current with tax filings and maintain the installment agreement during the time it is in effect.
• File for an Offer in Compromise and can pay off the settlement amount you have agreed on within 12 months.

IRS Fresh Start Program Qualifications

Taxpayer	Businesses
Owes less than $25,000*	Owe less than $25,000. **
Can pay their initial liability down below $25,000 *	Can pay the due amount (up to $25,000) within 34 months. **
First-time tax debtor	Are current with federal tax filings. **
	Are up-to-date with federal tax payments. **
	First time falling behind on IRS tax payments. **

*You might also qualify for a federal tax lien withdrawal.

** You might also qualify for the abatement of specific penalties.

How Do I Apply for the IRS Fresh Start Program?

There is a different application route per the IRS Fresh Start program you wish to benefit from. Here are the details required when you apply for IRS Fresh Start:

• Payment plans – You can download and fill out the Form 9465 (Installment Agreement Request). More details here.
• Installment plans – The application depends on whether you are a business owner or employee and the total liability owed.
• Offers in Compromise – You can file Form 433-F, 433-A, and Form 656 to initiate the process.

Note that it may take from a few minutes and up to 48 months to receive approval. The IRS Fresh Start program has lots of rules. Going it alone might make you miss out on its many benefits.

So, before you do anything, it is paramount to understand the ins and outs of the program first.

It is also critical that you assess your situation properly. This is so you can make the most informed and educated decision when choosing a solution.

If you have a delinquent tax liability with the IRS or you’re in the midst of an IRS audit, it’s best to consult trusted tax professionals,like us,who will be able to actively analyze your financial situation and strategize a plan that will best suit your needs.

Additionally, we can become your voice. We can aggressively negotiate with the IRS on your behalf. It may even be possible to settle your liabilities for much less than what you owe at that given time.

How Does the Fresh Start Tax Program Work: Getting Started

It’s crucial to stay informed on the latest updates regarding IRS guidelines and requirements to ensure a smooth process. Whether you’re seeking guidance for tax filing or payment plans, having access to reliable and current information is essential. Keeping up with Fresh Start info the IRS needs can help alleviate stress. Set yourself on the right path towards financial stability.

Contact us today for a free tax consultation. Let’s see how we can make the most of the IRS Fresh Start program for you.

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