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The IRS Fresh Start Program is designed to provide back tax assistance help for individuals who owe up to $50,000 in past-due taxes. Fresh Start expands the availability of streamlined installment agreements and offer-in-compromise programs. It also increases the amount of back taxes that will result in a tax lien.
With Fresh Start, taxpayers who owe less than $50,000 can automatically qualify for an installment agreement. You can make payments over 72 months without providing additional financial information. Previously, taxpayers who owed $25,000 or more had to fill out additional forms and provide documentation before an installment plan would be granted.
If you can’t pay your tax bill right away and have a balance below $50,000, complete IRS Form 9465 to apply for an installment agreement. You can also use the Online Payment Agreement tool.
Taxpayers who owe more than $50,000 or who can’t afford to pay their balance within six years can also complete IRS Form 9465. However, you also need to complete IRS Form 433, Collection Information Statement. This form asks for information about your assets, income, and expenses.
Short-term payment plans, those that are complete in 120 days or less, can be set up with no fee. A long-term payment plan of up to 72 months carries a fee of $31 if you opt for a Direct Debit Installment Agreement and higher fees for other payment methods. Taxpayers who have income of less than 250 percent of the federal poverty threshold can qualify for reduced or eliminated fees.
Penalties can make up a significant portion of your tax balance, often as much as 40 percent. You can accrue penalties for failure to file and/or failure to pay your taxes. Under the Fresh Start program, you may qualify for abatement of some of these penalties.
Under Fresh Start, taxpayers are not subject to a tax lien until they owe at least $10,000 in back taxes. Previously, lower tax balances could result in liens. With a tax lien, the IRS has a claim on your assets. This means they can seize your savings, wages, and property to satisfy your back taxes.
Fresh Start also provides for the withdrawal of tax liens when arrangements are made to resolve the back taxes. When liens are withdrawn, they are removed from the public record and will no longer have a negative impact on your credit score. As long as you pay down your balance to under $10,000 and/or enter into a Direct Debit Installment Agreement, you can complete withdrawal by submitting IRS Form 12277, Application for Withdrawal.
If you default on your installment agreement or accrue more debt that increases your balance over $10,000, you will receive a new Notice of Federal Tax Lien.
An offer in compromise may be available to taxpayers who cannot afford to pay their taxes. With this program, you can negotiate to settle your taxes for less than you owe. You must prove to the IRS that making payments on your taxes would prevent you from meeting your basic living expenses.
The Fresh Start program introduced less complex paperwork to apply for an offer in compromise and made it easier for taxpayers to qualify. The IRS is now more flexible when determining the amount you can afford to pay over several years. This number, called reasonable collection potential, is the minimum offer amount the agency will accept.
Many taxpayers consult with tax professionals who can help them create an offer the IRS will accept. Your offer in compromise can consist of either a lump sum or payments over time as an installment agreement.
You can get an idea of whether your offer will be accepted by using the IRS Offer in Compromise Pre-Qualifier tool, which is available online.
Taxpayers must meet several qualifications before taking advantage of Fresh Start programs. Before applying, make sure that you:
If you have filed for bankruptcy, you are not eligible for Fresh Start programs because your back taxes will be restructured or eliminated by the bankruptcy court. The IRS will not attempt to collect past-due taxes while you have an open bankruptcy case.
Taxpayers who are seeking back tax assistance can contact Solvable for assistance. We’ll ask a few simple questions about your back taxes and match you will well-reviewed companies that can help. Get on the path to a better financial future.