Are you grappling with paying federal tax debt?
If so, you may have come across the IRS Fresh Start Program (or People-First Initiative) in your research and are wondering if this initiative can solve your problems.
What is the IRS Fresh Start Program, and can it help you settle your debt? The answers to these questions depend on you and your financial circumstances.
The first step to understanding how the IRS Fresh Start initiative may be able to help you is learning what it is and how you can qualify. Keep reading to learn more about this tax forgiveness program.
What Is the IRS Fresh Start Program?
The IRS Fresh Start program can help individual taxpayers and small businesses who are struggling to pay federal taxes.
The program was established in its original form in 2011, but the IRS has expanded it by utilizing more adaptable Offer-in-Compromise terms.
Now, some of the most financially distressed taxpayers will have the opportunity to clear up their tax debt, perhaps more quickly than before.
Offer in Compromise
An Offer in Compromise (OIC) is an agreement between the IRS and a taxpayer that settles the taxpayer’s indebtedness for a lower amount than what is owed.
The IRS won’t just accept any OIC. The IRS looks at the taxpayer’s assets and income to decide on their collection potential. They will assess whether the taxpayer can pay in full as a lump sum or by another payment arrangement. These agreements are subject to the acceptance of legal requirements.
The IRS has implemented changes to the Fresh Start Program to address the many taxpayers who are struggling to pay their bills. The Fresh Start Program expansion focuses on financial analysis.
The changes also enable some taxpayers to resolve tax debt in as little as two years. This change is significant, as the taxpayers enrolled in the original program were faced with repayment terms over four to five years.
Original Program Initiatives
The Fresh Start Program was implemented to give taxpayers struggling with first-time tax debt another chance. The original program initiatives include:
- Making it easier to obtain a Federal Tax Lien (FTL) once the debt was repaid
- Raising the dollar amount that triggered FTLs being filed from $5,000 to $10,000 at first, then to $25,000 a few months later.
- Withdrawing FTLs more frequently when a taxpayer entered into a Direct Debit Installment Agreement (DDIA) 1
- Streamlining and expanding the qualifications of the OIC program
Changes to the IRS Fresh Start Initiative
A year later, in 2012, the IRS added to the Fresh Start Initiative. It became available to more taxpayers as the following revisions were implemented:
- When considering an OIC, easing of how the IRS calculates a taxpayer’s future income
- Expanding the types and amounts of expenses the IRS considers reasonable and relevant when concluding how much a taxpayer can pay monthly.
These changes implemented real-life situations into a program previously entirely based on specific formulas.
The IRS now considers the things that typically cause people to fall behind on taxes—living expenses, local tax debts, student loans—in their determinations.
Who Qualifies for the IRS Fresh Start Initiative?
You can qualify for the IRS Fresh Start Program if you can accept paying your tax debt over time through an installment agreement. You must meet the following parameters to benefit from the program:
- You can pay off the remaining debt in 60 months or less
- You owe less than $50,000 or can pay a more considerable liability down to that amount
- It’s your first time falling behind on IRS payments
- Your tax filings are up-to-date through the latest tax year
- You agree to a direct payment installment agreement
- You maintain the agreement, stay current with future tax filings, and don’t incur new tax debt while the installment agreement is in effect
- You file for an OIC and can pay the agreed amount within 12 months
If you qualify for the program, other bonus items may also apply:
- If you’re a first-time tax debtor, you are now eligible for a penalty abatement of specific penalties
- If you owe less than $25,000 or can pay their initial liability down below that amount, you may be eligible for the withdrawal of a tax lien.
IRS Tax Forgiveness for Businesses
Businesses are also able to participate in the IRS Fresh Start Initiative. You’re eligible when:
- Your company owes less than $25,000, and you can pay your liability down within 34 months
- Your business is current with all federal tax filings and payments
- It’s your business’s first time in tax debt with the IRS
As a bonus for qualifying, your business may be eligible for the abatement of particular penalities.
How Do You Apply for the IRS Fresh Start Program?
To apply for this program, you must follow all guidelines established by the IRS. First, you must file all of your tax returns—back and current.
If you have outstanding tax returns that you haven’t filed, you can’t request any of these repayment options. Once enrolled in the People-First Initiative, you also must elect to file all of your future tax returns on time.
When you have filed all of your tax returns, you can visit IRS.gov to enroll in the Fresh Start Initiative using the Online Payment Agreement tool. If you prefer to enroll by mail, you can access and file a Form 9465.
Enrolling in the program can be a complex undertaking. If you become overwhelmed and don’t understand the process, you may not see through to the end.
To ensure that you’ve enrolled successfully, you should hire a tax lawyer at GetATaxLawyer.com to assist you in the process. We can help you disclose all of the requested information and avoid disclosing anything that may be used against you in an audit or criminal investigation.
Your tax professional will advise you on the best repayment option to apply for based on your situation.
Let Us Guide You in the Right Direction
So, what is the IRS Fresh Start Program? It’s an option you should explore if you or your business is struggling to find tax relief.
You can avoid owing more back taxes and settle your tax balance more affordably when you enroll in the program. However, specific parameters are surrounding the initiative, which is when our tax attorneys step in. We help guide you in the right direction with our knowledge of tax law and experience so that you can find financial freedom with the IRS.
- Internal Service Revenue – Understanding a Federal Tax Lien