What is the IRS Fresh Start Program?

Key takeaways:

  • The “IRS Fresh Start Program” is a program that helps taxpayers manage their tax debt without increasing their financial hardship.
  • A Collection Information Statement is a financial document that allows the IRS to evaluate the income and expenses of wage employees and self-employed individuals.
  • The IRS Fresh Start Program aids in tax relief through installment agreements, offer in compromise, currently non-collectible status, penalty abatement, federal tax lien avoidance, and wage garnishment avoidance.
  • You must provide thorough financial documentation and be up-to-date on all tax filings to qualify for the IRS Fresh Start Program.
  • Few things in life are more stressful than being saddled with tax debt. No one wants the IRS to come knocking on their door demanding they pay a hefty tax bill or a dreaded audit. Luckily enough for those of us who find ourselves with tax debt, the Federal Government of the United States deployed the Fresh Start program back in 2011. The IRS developed this initiative to provide tax relief to certain taxpayers who owed taxes, and while it may seem confusing to navigate, with the help of a tax professional like Ideal Tax, you can combat your financial hardship and resolve your tax issues.

What is the Fresh Start Initiative?

The Fresh Start program initiated by the IRS aims to help taxpayers manage their tax debt. One of the main goals of the IRS Fresh Start program was to combat predatory collection practices, such as financial penalties and tax liens, used by the Federal Government to punish individuals and small businesses with outstanding tax debts that they haven’t yet paid. Moreover, the IRS doubled the threshold required for the IRS to file a notice of a federal tax lien. Therefore, the IRS Fresh Start initiative allows for a more graceful approach to achieving tax debt relief while avoiding tax liens.

The IRS Fresh Start program offers a breath of fresh air to those of us who receive an unpaid tax bill and are already drowning in debts that we can’t afford to pay. Those with tax issues who are eligible to benefit from the IRS Fresh Start initiative may be able to reduce their tax debt by up to 90%. That amount of forgiveness can be life-altering by allowing eligible taxpayers to get back on track financially and begin to plan for a brighter and more secure future.

Let’s run through a crash course on what an IRS Fresh Start entails and what you need for the IRS fresh start program qualifications.

How does the Fresh Start program provide a Fresh Start?

The IRS Fresh Start program stipulates that the IRS cannot collect more than taxpayers can reasonably pay without sacrificing their basic needs, such as food, shelter, clothing, and utilities. The guidelines provided by the IRS Fresh Start program help broker an agreement between the IRS and taxpayers who qualify that doesn’t put them in a place of undue hardship. Each situation is decided based on case-by-case circumstances, considering the financial situations of the parties involved. By allowing you a more manageable way of clearing what you owe, the IRS Fresh Start provides an opportunity to start fresh.

How can the IRS FRESH START PROGRAM provide tax help?

So how does the fresh start program work? With the Fresh Start initiative, there are multiple ways for more taxpayers under financial hardship to obtain tax relief. For example, you can fill out an IRS form on the IRS website, or a call or email may be used to contact a representative to help with your tax problems. If you are lucky, you may even have a local IRS office where you can meet with an agent in person to help determine if the Fresh Start program is for you. Tax professionals can move you through the process, and help you get into fresh-start tax programs for resolving outstanding delinquent liabilities. Moreover, in the case of negligence in filing, they will be able to help you request penalty abatement.

If you want to get tax relief, consider that once the IRS reviews your application, you will find out if you qualify and, if so, what your new far more affordable monthly payment will be. When being considered for this program, the IRS evaluates your financial situation to determine how much of your tax debt you can reasonably pay. Taxpayers who owe money to the IRS can receive substantial levels of tax relief, so it is beneficial to apply to the Fresh Start Initiative if you need help reducing what you must pay to avoid financial hardship.

Collection Information Statement

Collection Information Statements are a piece of financial documentation that allows the IRS to gather information from both wage-earning taxpayers and self-employed individuals. The taxpayer provides financial information about their income and expenses, and if they are eligible for the IRS fresh start program, they can settle on a more manageable repayment structure to help them pay their debt. There are multiple types of tax relief offered by the IRS Fresh Start Initiative program that provides either a direct payment structure or debt settlement to help a taxpayer resolve their tax issue, however, their tax filings must be up to date in order to be eligible.

The IRS Fresh Start program possesses four
main programs that aid in tax debt relief:

Offer in Compromise
An Offer in Compromise, also known as an OIC, permits qualified taxpayers to settle on a reduced amount that the IRS will accept in place of payment in full on owed tax debts. Being able to qualify for the OIC program is your best-case scenario for tax repayment options as you can reduce your debt and ease your financial situation. However, eligibility guidelines for this method of tax debt reduction are stringent and saved for the direst cases.
Federal Tax Lien Avoidance

The Fresh Start program increased the amount a taxpayer needs to owe to $10,000 before tax liens can be filed by the IRS. Under the right circumstances and depending on the outstanding debt, a tax lien withdrawal is possible that can reduce what an individual must pay to the IRS.

Wage Garnishment Avoidance
When wage earners owe money to the IRS but fail to pay their debt, credit bureaus can issue wage garnishments in which money is taken directly from their paycheck. This affects the taxpayer’s future income until the lump sum of debt is paid in full but with the help of the Fresh Start program, taxpayers can sometimes qualify for an offer in compromise or installment agreement that helps them in paying back their debt to the IRS. In addition, if you can provide sufficient evidence or reasonable cause for your financial hardship, you might qualify for the program of IRS penalty abatement. With penalty abatement, the IRS could waive the penalties on your.
Penalty Abatement

When a taxpayer fails to file or fails to pay their taxes, they can accrue penalties that increase the debt that they must repay. As a form of tax relief, the final Fresh Start program offering is known as “Penalty Abatement.” If the IRS determines that you meet a strict set of requirements, they may absolve you of the penalties associated with your tax bill of up to $100. When a taxpayer has to repay their debt through an installment plan with the IRS, and they fail to do so, they might incur extra interest charges. When aiming for a fresh start for your finances, a non-collectible status can help a taxpayer get their finances in order. Moreover, the most vital factor is to contact the IRS immediately since a taxpayer might be able to qualify for another program with the IRS.

Currently Non-Collectible Status
If an individual taxpayer is in dire straits and cannot afford to make any payments to the IRS for back taxes, they may qualify to get a status of “Currently Non-Collectable.” This does not absolve the person from debts owed but will halt collection activities. Eligibility for this form of tax relief is decided based on a person’s assets, current income, and monthly expenses and can help taxpayers manage their situation before paying what they owe in debt. The non-collectible status is a beneficial program for any originally owed tax to the IRS. A non-collectible status helps taxpayer get their finances in order before paying back their outstanding tax debt. In some form, the non-collectible status is a program for creating a fresh start for your total debt and is widely used as a program to get fresh start tax relief. However, to get into the fresh start program, a taxpayer must ensure that filings for the last six months are correct and filed. If a taxpayer fails to notify the IRS and assumes a non-collectible status to be active, additional penalties and interest incur on their IRS bill.
Installment Agreement

As part of the fresh start that the IRS offers, installment agreements allow qualified individuals to make monthly payments to the IRS as a method of helping them pay their taxes. These payments are applied directly to reducing the determined tax debt until payments are no longer in arrears. The other good news is that once you are set up with installment payments under an installment agreement, you will no longer receive those nasty IRS collection letters, however, the IRS can and will still charge you interest on the amount of tax debt you owe. After making your third direct debit installment agreement payment and your tax debt balance is below or drops below $25,000, you will be in a better position to prevent or help remove federal tax liens. You must keep up with your monthly direct debit payments once you have an extended payment plan established. The installment agreement for tax relief is considered the most used fresh start program of the entire IRS fresh start initiative.

Documentation is critical when applying for relief through the Fresh Start Initiative Program, as the IRS will need to see evidence proving your need for such assistance. Therefore, your best course of action for getting into the fresh start program will be to find as much supporting evidence as possible to make a case for yourself.
Finally, all of your tax filings must be up to date before you can qualify to reap the benefits of the Fresh Start initiative. That means that in order to get a fresh start, you must start filing unfiled tax returns or incomplete returns and ensuring your current withholdings and estimated tax payments are correct.
The documentation you may be asked to provide to the local IRS office during the application process can include but is not limited to:

* Student loan statements
* Insurance claims
* Medical records and doctor statements
* Birth/Death certificates of immediate family members
* A personal letter of explanation as to your situation

How do I apply?

Do you know a taxpayer who could benefit from an offer in compromise?

If you or someone you know feels they may benefit from the Fresh Start program, now is the time to get your documentation in order so that you can apply and take advantage of all this program offers.

The process of finding a fresh start tax program for your situation can be confusing and overwhelming despite all that we have covered. Having tax experts on your side is the best way to help ease your worry and financial burden.

We recommend contacting one of the tax experts from Ideal Tax who offer a free consultation to help you through the complexities so that you can have the best chance of approval for your Fresh Start with the IRS. In addition, a qualified tax professional could help you get into the main programs of the IRS debt relief, and help you complete the request for penalty abatement or currently non-collectible status.

The IRS Fresh Start initiative today

While the Fresh Start Initiative Program saw expansion in 2012 so that more taxpayers could apply and qualify for tax relief, the most up-to-date adjustment to the program is an ease-up on the calculation of the taxpayer’s projected future income when an Offer in Compromise is considered.

The Fresh Start tax program continues to see record numbers of applications and, in turn, an equally impressive number of approvals. The economic hardships inflicted on many families during the ongoing Covid 19 pandemic further amplified this trend. In addition, with a theoretical recession, more and more people will look to get into the fresh start tax program to get tax relief for outstanding tax debt.

Many taxpayers are still struggling with financial woes as the pandemic winds down. The IRS is expected to continue its trend of lenient guidelines for a bit longer but this will be coming to an end.

We provide professional guidance to people whose lives have been affected by tax problems.
To evaluate your specific tax issue and determine if you qualify for tax relief and the fresh start program, please contact us for a free consultation.
We are COVID-19 prepared, we will work with you over the phone and via e-mail. The content of this post does not replace the advice of a licensed tax professional.
Consult a qualified tax professional for questions specific to your circumstances.

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