What Is The IRS Fresh Start Program? 2023 Updates
The IRS Fresh Start program initiated by the IRS aims to help taxpayers manage their owed 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.
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 a tax lien or levy.
We’ll provide you with as much information as possible to see if the fresh start program is for you. Let’s take a deeper dive into the details.
Key takeaways:
The IRS Fresh Start Program helps struggling taxpayers manage their tax debt without increasing their financial hardship.
The IRS Fresh Start Program aids in tax relief through four main program options such as installment agreements, offer in compromise, currently not-collectible status, and penalty abatement.
You must provide thorough financial documentation and be up-to-date on all tax filings to qualify for the IRS Fresh Start Program.
Facts & Statistics
- The IRS Fresh Start Initiative was created in 2012 in response to the economic downturn.
- The IRS has accepted over 600,000 out of 1.3 million offer in compromise requests
- The average amount saved by taxpayers who were granted the offer in compromise is $6,000.
- Taxpayers have settled on an average of 57% less than what they originally owed
- The IRS has provided payment plans to over 3 million taxpayers through the Fresh Start Program.
- The program has helped over 10 million taxpayers since its launched.
- Taxpayers have been allowed to pay back their tax debt in monthly installments for up for 72 months
TABLE OF CONTENTS:
What Are The Benefits?
The IRS Fresh Start program can drastically reduce the total amount owed. That amount of forgiveness can be life-altering by allowing eligible taxpayers to get back on track financially and gain financial freedom from the IRS.
Here are some key benefits of the program:
- Reduce tax debt by up to 90%
- Relieve any financial obligation to the IRS
- Lower Penalties and Interest
- Federal Tax Lien Avoidance
- Wage Garnishment Avoidance
- Finally getting your life back on track
Let’s discuss options and 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 IRS Fresh Start Program Work?
The fresh start initiative was created to offer those who haven’t had an adverse history with the IRS an opportunity to make payments based on given criteria.
It allows taxpayers the option to pay their debt over the course of six years through an installment agreement plan. The amount is based on factors such as current annual income and liquid asset value.
There are four forms of options within the IRS fresh start program for tax debt relief such as the offer in compromise, installment agreements, currently non-collectible, and penalty abatement.
The Four Programs for the IRS Fresh Start program:
1. Installment Agreements
As part of the fresh start that the IRS offers, installment agreements give qualified individuals the ability to make affordable monthly payments to the IRS as a method of helping them pay their taxes.
These affordable payments are applied directly to reducing the determined tax debt until payments are fully paid. 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 or a tax levy.
You must keep up with your monthly direct debit payments once you have an affordable extended payment plan established. The installment agreement for tax relief is considered the most popular fresh start program out of the entire IRS fresh start initiative.
2. Offer in Compromise (OIC)
Another option, such as the Offer in Compromise, also known as an OIC, permits qualified taxpayers to make a settlement based on a reduced amount that the IRS will accept in place of payment in full on owed tax debts.
The ability 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 debt cases.
3. Currently Not Collectible Status
Currently Not Collectible essentially lets taxpayers place their payments on hold while in financial hardship. If you can prove that paying your living expenses along with paying your back taxes will cause financial hardship, you may be eligible.
Currently Not Collectible doesn’t forgive your tax debt but rather delays payments until you’re back on your feet and can afford to pay.
If approved, the taxpayer will be placed in an uncollectible status, and the IRS must immediately stop collection actions and release any existing levies on assets. During this process, the IRS may file federal tax liens in case you fail to pay and collect interest on the outstanding amount.
What about future refunds?
The IRS will take any future refunds to pay the outstanding debt owed unless the taxpayer can prove the refund is necessary for living expenses.
4. Penalty Abatement
If you have significant penalties with the IRS, there is a chance you could be eligible for the IRS fresh start penalty relief. 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.
Who is eligible?
Eligibility for the fresh start program must meet the following criteria:
For sole proprietors – Income has dropped by 25%.
Annual income is below $100,000. (single)
You have an annual income of less than $200,000 (married). You owe less than $50,000 in tax debt.
- Taxpayers who have a clean history with zero missed payments with the IRS.
Collection Information Statement
Collection Information Statements such as Form 433 is a financial documentation with your income and expenses. The IRS uses this to determine your eligibility.
How Do I Apply?
The documentation you may be asked to provide during the beginning stages of 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
Finally, your tax filing must be up to date before you can qualify to reap the benefits of the Fresh Start initiative. This means that in order to get a fresh start, you must complete your unfiled tax returns or incomplete tax returns and ensure your current withholdings and estimated tax payments are correct.
How The Program Works Today
While the Fresh Start Initiative Program saw a new expansion in 2012 so that more taxpayers could apply and qualify for tax relief, it’s become a popular option for tax relief among Americans.
The Fresh Start tax program has a high record number of applications. The economic hardships inflicted on many families during the ongoing Covid 19 pandemic amplified this trend.
Many taxpayers still struggle with their tax returns and 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.
FAQ
What is the Timeline for the Program?
The proper timeline for the fresh start program is typically around 6-12 months. However, there are a few special cases resulting in a longer timeline.
What is the IRS Hardship Program?
The IRS hardship program is located within the Currently Not Collectible (Part 5. Chapter 16. Section 1). It states that taxpayers may qualify for a Currently Not Collectible if they cannot meet the necessary daily living expenses due to the collection of the liability.
Proving hardship requires the submission of financial information using one of the following forms:
- 433A
- 433F
- 433B
Is the program new?
The fresh start initiative isn’t new and has been around since 2011 to aid in the economic downturn for taxpayers. Since the beginning, the IRS has helped more than 1.7 million people settle their tax debt.
How much does the Program Cost?
The cost differs for each program depending on an individual’s circumstance. For example, a currently not collectible can defer your payments but accrue interest on your balance. If your goal is to reduce the total amount owed, an offer in compromise might be a better option.
It’s imperative to pick the program that best suits your financial situation.
What happens if I don't participate?
Consequences can be severe, resulting in various penalties and interest fees. Additionally, taxpayers could be subjected to wage garnishments and liens.
Is it program legitmate?
You’re probably questioning if the IRS Fresh Start Program is legit. The good news is that the program is 100% legitimate! The IRS has forgiven millions of Americans, giving them financial freedom from tax debt.
What percentage will the IRS settle for?
A non-refundable down payment of 20% of the total amount is what the IRS will typically require before consideration. The amount of settlement varies depending on a taxpayer’s financial status. This includes assets, income, and expenses.
Is the IRS Fresh Start Program and the Fresh Start Initiative the same thing?
Yes, the IRS Fresh Start Program and the Fresh Start Initiative are essentially the same.
Will the IRS Fresh Start Program hurt my credit?
The simple answer is no. The program is rather helpful in relieving tax liens against your assets. However, if a tax lien is claimed against you for not paying your IRS taxes, your credit may be in jeopardy.
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, which is why we’re here to help.
Don’t hesitate to reach out to us at: (877) 441-0013
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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