IRS Fresh Start Program

The IRS Fresh Start Program is an initiative launched by the Internal Revenue Service (IRS) to help individuals and businesses who are struggling to pay their federal tax debt. It is sometimes known as the IRS Fresh Start Initiative. The program offers several options, such as IRS installment agreements and Offers in Compromise (OIC), to make it easier for taxpayers to settle their tax debts and avoid penalties, liens, or wage garnishments.

Depending on your financial situation, how much you owe, and how much you can afford to repay, you can take advantage of the various component programs of the IRS Fresh Start Initiative, including the following:

• The Tax Lien Thresholds, which raised the amount of unpaid taxes that trigger a federal tax lien, effectively reducing the number of liens filed against taxpayers. This threshold is now set at $10,000, up from $5,000. It also offers the option to withdraw a tax lien once the debt is paid or the taxpayer enters into a payment plan.
• Installment Agreements – the threshold for qualifying for streamlined installment agreements has been increased, making it easier to enter into payment plans. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to six years.

  You can also apply for Partial Pay Installment Plans if you’re struggling to make full payments. With that, you can make smaller and easier payments over time. However, note that interest and penalties continue to accrue.

• Offer in Compromise (OIC) provides an opportunity for taxpayers to settle their tax debt for less than the full amount owed if they cannot afford to pay in full. The IRS Fresh Start Initiative made the qualification criteria more flexible, allowing more taxpayers to benefit from this option.

• The Currently Not Collectible (CNC) Status causes the IRS to temporarily stop their debt collection for taxpayers facing significant financial hardship. When a taxpayer’s income and assets validly show that they cannot make any payments without compromising essential living expenses, the IRS may place their account in the CNC status. This pauses active collection activities, such as wage garnishments and bank levies. Interest and penalties continue to accrue, but the IRS will not take collection action until the taxpayer’s financial situation improves.

• Penalty Abatement offers relief from certain IRS penalties, such as those for failing to file or pay taxes on time, when taxpayers meet specific eligibility criteria. The IRS Fresh Start Initiative makes it easier to qualify for penalty abatement under the First-Time Penalty Abatement (FTA) program.

To qualify for the IRS Fresh Start Program, you must meet certain criteria, which may vary depending on the specific relief option you’re going for. Below are the key eligibility criteria based on the type of relief.

1. For Installment Agreements, you qualify if you owe $50,000 or less in combined tax, penalties, and interest. You must be able to pay the full IRS tax debt within six years and be current with all federal tax filings.
2. For Offers in Compromise (OIC), you may qualify if you can demonstrate financial hardship as a factor for your inability to pay the full tax debt. The IRS considers factors like the taxpayer’s future income, expenses, asset equity, and ability to pay taxes when determining eligibility. You must be current with all tax returns and not be in an open bankruptcy proceeding.
3. For Tax Liens, you may qualify if you owe less than $10,000 in back taxes. For those who have already had federal tax liens filed, they may qualify for lien withdrawal if they enter into a direct debit installment agreement and maintain regular payments.
4. For Penalty Abatement, you may qualify for penalty abatement if you can demonstrate a valid reason for failing to pay or file their taxes, such as unemployment, illness, or other financial hardships. First-time penalty relief is also available to taxpayers who have been compliant in previous years but faced unexpected challenges in the current tax year.
5. For Currently Not Collectible (CNC) Status, you may qualify if you can demonstrate that paying your tax debt would cause significant financial hardship. The IRS will assess your financial situation, including income, expenses, and assets, to determine if you have little to no ability to pay your tax liability. You must provide detailed financial information and be current with all required tax filings. If approved, collection actions are temporarily paused, though interest and penalties will continue to accrue on the outstanding debt.

It is important to be up to date with all required tax filings and maintain communication with the IRS to resolve your tax debts. If you owe more more than $25,000 in back taxes, it’s recommended to consult with our experienced tax attorneys at Victory Tax Lawyers so we can help you resolve your tax debts before you get into trouble with the IRS.

The application process for the Fresh Start initiative varies based on the specific tax relief you are applying for. Here’s a brief overview:

For Installment Agreements

Eligible taxpayers can apply online through the IRS website using the Online Payment Agreement tool. Alternatively, you can submit Form 9465 (Installment Agreement Request) by mail. When applying, you will need to provide financial details such as income and expenses, and propose a monthly payment plan – estimated tax payments you can make monthly. To get the best payment plan, our experienced tax professionals can help you negotiate for a lower monthly payment so you can pay up with ease.

For an Offer in Compromise (OIC)

You must complete and submit Form 656 (Offer in Compromise) along with Form 433-A (OIC) or Form 433-B (OIC), depending on whether you’re applying as an individual or a business. You will need to provide detailed financial information to demonstrate that you cannot pay the full tax debt. A non-refundable application fee and an initial payment (based on the proposed offer) are also required when submitting the forms.

For Tax Lien Withdrawal

To request a lien withdrawal, you must pay the tax debt in full or set up a direct debit installment agreement. A direct debit installment agreement means your payments will be automatically deducted from your bank account, which is preferred by the IRS for lien withdrawals. Confirm that all your tax returns are filed and current. You cannot request a lien withdrawal if you have unfiled tax returns or other tax obligations. After meeting the requirements, you can apply for lien withdrawal by submitting Form 12277 (Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien).

For Penalty Relief

Identify the specific penalty you want relief from, such as a failure-to-file or failure-to-pay penalty. If you are seeking first-time penalty abatement, be sure that you have filed and paid all tax returns in the past three years and must not have previously been penalized. To request penalty abatement, you can call the IRS directly at their customer service line, or submit a written request to the IRS explaining the cause of your penalty and why you deserve relief. Include any supporting documentation (e.g., medical records if illness caused the penalty or proof of unemployment).

For Currently Not Collectible (CNC) Status

Begin by completing Form 433-A (Collection Information Statement for Wage Earners and Self-Employed Individuals) or Form 433-F (Collection Information Statement), depending on your situation. Once the form is complete, submit it directly to the IRS, either by calling them to discuss your financial hardship or by mailing it with supporting documentation (such as proof of expenses, medical bills, or unemployment records) that illustrates your inability to pay. If approved, the IRS will temporarily halt collection activities, such as wage garnishments or bank levies. However, keep in mind that interest and penalties will continue to accrue on the outstanding debt while in CNC status.

Note that you don’t have to struggle through the process of applying for an IRS Fresh Start Program by yourself. Our team of tax professionals at Victory Tax Lawyers can analyze your tax situation, find the most suitable tax relief for you, and make the application process easy and stress-free.

The IRS Fresh Start Program provides various significant benefits that can help you manage your back taxes more effectively as they reduce the financial burden of penalties and enforcement actions. The primary benefits of the program are as follows:

1. With simplified payment plans, you can pay off your tax debt in affordable monthly installments over a longer period.
2. The OIC provides for reduced tax debt as it allows eligible taxpayers to settle their tax debt for less than the full amount owed. This is particularly beneficial for those experiencing financial hardship, as it provides a path to resolve tax issues without facing severe financial strain.
3. By raising the amount of unpaid taxes that trigger a federal tax lien, the program reduces the likelihood of liens being filed against your property. Taxpayers who enter into direct debit installment agreements can also request the withdrawal of existing tax liens, which can help improve their credit score.
4. Penalty abatement relief helps you avoid or reduce failure-to-pay and failure-to-file penalties. Additionally, first-time penalty relief provides a fresh start for those facing penalties for the first time.
5. The program has made it easier for taxpayers to qualify for relief, expanding the eligibility criteria for installment agreements, Offer in Compromise, and penalty abatement.

You can maximize the benefits of the IRS Fresh Start Initiative if you know the right things to do. Here, we’ve compiled some tips to help you.

Stay up to date with all your tax filings before applying for any part of the Fresh Start Program. The IRS requires that all tax returns be current to qualify for most relief options. Use the IRS online tools for ease. These online tools can help you determine if you qualify and can reduce the time needed to submit applications.

Be prepared to provide your documentation to demonstrate your ability (or inability) to pay your tax debt. Whether applying for an installment agreement or an Offer in Compromise (OIC), you will need detailed information about your income, expenses, and assets.

Request penalty relief if you qualify, especially if this is your first time facing penalties, or if you experienced an unforeseen financial hardship.

Be honest and transparent about your financial situation when applying for an Offer in Compromise or any relief option. The IRS will evaluate your ability to pay based on the information you provide, so accuracy is key.

Stay in contact with the IRS. You need regular communication with the IRS to be sure that your application is processed smoothly. Respond promptly to any requests for additional information or documentation. If your tax situation is complex, consider consulting a tax professional who can guide you through the Fresh Start Program, help negotiate better terms, and ensure that all necessary forms are correctly filled out and submitted.

As a taxpayer, it’s best to pay your taxes on time and stay away from IRS trouble. Even when you encounter any tax challenge or accumulate tax debts, you should make efforts to resolve them as quickly as possible. To achieve this, you must understand how the IRS works, your tax deadlines, and the payment plans you can explore if you find yourself owing taxes. Understanding all these can be overwhelming sometimes; that’s why you need to work with a tax lawyer to assist and guide you. Our experienced tax lawyers at Victory Tax Lawyer can show you how to set up a payment plan with the IRS. Our friendly attorneys will help you understand the details of a payment plan that best suits your tax situation. Schedule a free consultation with us today!