The IRS Fresh Start Program is a variety of initiatives that helps struggling taxpayers reduce their tax debt and receive a “fresh start” through the implementation of tax relief procedures such as debt settlement, payment plans, first-time penalty waivers, and the temporary delay of tax collections.
Taxpayers who owe tax liabilities to the IRS but are struggling to pay what they owe while still affording their basic living expenses can benefit from the tax relief initiatives offered by the IRS Fresh Start Initiative that help them reduce their tax debt in a way that is manageable based on their financial situation. As potential participants consider the IRS Fresh Start Program, conducting thorough IRS Fresh Start Program reviews can provide valuable insights into the experiences of others who have embarked on this journey to regain financial stability.
In 2023, there are four main tax debt relief programs within the IRS Fresh Start Initiative, each with unique qualification requirements. These are:
- Offer in Compromise
- Installment Agreements
- Currently Non-Collectible Status
- Penalty Abatements
These pillars of the IRS Fresh Start Program support the goal of relieving taxpayers from the burden of tax collection strategies used by the Federal Government to punish individuals and small businesses with outstanding tax debts, such as financial penalties and tax liens.
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.
How Does The IRS Fresh Start Program Work Today?
The Fresh Start Initiative Program has become a popular option for tax relief among Americans, especially since the new expansion in 2012 that expanded the qualification parameters so that more taxpayers could apply and qualify for tax relief.
For example, 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.
The Fresh Start tax program has historically received a high number of applications, and the economic hardships inflicted on many families during the COVID-19 pandemic amplified this trend, as shown by the record number of applications during 2020.
Many taxpayers still struggle with their tax returns and financial woes as the pandemic winds down and inflation continues, but now that it is 2023, the trend of lenient guidelines is expected to eventually come to an end. For this reason, individuals experiencing tax problems should reach out to a tax relief company as soon as possible to take advantage of the IRS Fresh Start Program.
The Four Relief Programs for the IRS Fresh Start program:
Let’s review the four relief types available through the IRS Fresh Start Program and discuss the eligibility requirements.
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.
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.
Currently Not Collectible Status
Currently Not Collectible Status, also known as IRS Hardship Status, 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.
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.
How Do I Apply For The IRS Fresh Start Program?
Taxpayers must prove to the IRS that they cannot reasonably afford to pay their tax debt by gathering specific supporting documentation to use as evidence regarding the state of their financial situation.
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.
Conclusion:
In conclusion, the IRS Fresh Start Program stands as a potential lifeline for individuals ensnared in the complex web of tax debt, offering a glimmer of hope and a chance to regain financial stability. As we’ve explored, this program is not a scam, but rather a legitimate avenue provided by the IRS to assist struggling taxpayers in managing their tax burdens. The four relief programs within the initiative – Offer in Compromise, Installment Agreements, Currently Not Collectible Status, and Penalty Abatements – each serve as a lifeline to those burdened by tax liabilities.
The Fresh Start Program is a reflection of the IRS’s recognition that financial hardships and unforeseen circumstances can affect anyone. It underscores the importance of addressing tax debt in a way that is manageable and sustainable for individuals facing financial challenges. However, it’s crucial to approach the program with an understanding of its eligibility criteria, requirements, and the documentation needed to support your application.
As we stand on the precipice of a new year, it’s essential for individuals who find themselves in need of tax relief to consider reaching out to tax professionals and experts to navigate the intricacies of the Fresh Start Program. The program’s effectiveness lies not just in its mechanisms but in the informed and proactive approach of the taxpayers who seek its benefits.
In the world of finance, where uncertainty and stress often reign, the IRS Fresh Start Program stands as a beacon of hope, offering a pathway to a more secure and stable financial future. So, if you find yourself burdened by tax debt, it’s worth exploring the possibilities that the Fresh Start Program presents – a genuine opportunity for a fresh beginning on your journey toward financial well-being.
Glossary:
- Fresh Start Initiative: A program established by the IRS in 2011 to help delinquent taxpayers pay off their debt in manageable installments.
- IRS (Internal Revenue Service): The U.S. government agency responsible for the collection of taxes and the enforcement of tax laws.
- Taxpayer: A person who pays or is liable to pay tax.
- Delinquent Taxpayer: A taxpayer who has unpaid back taxes and has not yet arranged a plan with the IRS to resolve the debt.
- Installment Agreement: A payment plan established between the IRS and a taxpayer to pay off tax debt over time.
- Back Taxes: Taxes that have been partially or fully unpaid in the year that they were due.
- Tax Liens: A legal claim by the government on a taxpayer’s property as security for tax debt.
- Tax Levy: A legal seizure of a taxpayer’s property to satisfy a tax debt.
- Penalty Abatement: A provision that allows the IRS to reduce or eliminate penalties associated with unpaid taxes.
- Offer in Compromise: A program under the Fresh Start Initiative that allows taxpayers to settle their tax debt for less than the full amount they owe.
- Federal Tax Return: A document filed with the IRS that determines the amount of income tax owed to the federal government.
- Wage Garnishment: A legal procedure in which a person’s earnings are required by court order to be withheld by an employer for the payment of a debt such as back taxes.
- Federal student Aid: Federal Student Aid is a program by the U.S. Department of Education that provides financial assistance for education beyond high school.
- Federal student loan borrowers: These are individuals who have taken out loans from the federal government to finance their education.
- Federal student loans: Federal student loans are funds provided by the U.S. government to help students pay for their education expenses.
- Defaulted loans: Defaulted loans refer to loans where the borrower has failed to make the required repayments according to the loan agreement, resulting in a breach of the contract terms.
- Defaulted student loans: Defaulted student loans refer to student loans that the borrower has failed to repay according to the terms of the loan agreement, typically after a certain period of missed payments.
- Eligible for fresh start: Qualified or suitable to begin anew or make a new start, often after a period of difficulties or failure.
- Loan servicer: A loan servicer is a company that manages loans, handling administrative aspects such as collecting and processing payments, responding to customer inquiries, and managing escrow accounts.
- Payment pause: A payment pause is a temporary halt in the requirement to make payments on a debt, often allowed by lenders during times of financial hardship.
- Student loan payments: Student loan payments refer to the regular monetary amounts that a borrower is required to pay back to a lending institution for the money borrowed for educational purposes.
- Defaulted loan: A defaulted loan is a loan in which the borrower has failed to make the required payments on time, leading to a breach of the loan agreement’s terms and conditions.
