What Is the IRS Fresh Start Program?

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The IRS Fresh Start Program is an initiative implemented by the Internal Revenue Service (IRS) to help taxpayers who are struggling with their tax debts. It aims to provide individuals and small businesses with a fresh start by offering more flexible payment options and reducing the burden of penalties and interest.

One of the key features of the Fresh Start Program is the expansion of the streamlined installment agreement option. This allows taxpayers who owe less than $50,000 in combined taxes, penalties, and interest to enter into an installment agreement without the need to provide financial statements or substantiation of expenses. Previously, this option was only available for taxpayers with a liability of $25,000 or less.

Additionally, the Fresh Start Program increased the threshold for filing a Notice of Federal Tax Lien from $5,000 to $10,000. This means that the IRS will generally not file a tax lien unless the taxpayer owes more than $10,000 in tax debt. This change provides relief to taxpayers by reducing the negative impact of a tax lien on their credit score and financial standing.

Another significant aspect of the program is the Offer in Compromise (OIC) option. An OIC allows taxpayers to settle their tax debt for less than the full amount owed. Under the Fresh Start Program, the IRS has made it easier for taxpayers to qualify for an OIC by revising the calculation for determining a taxpayer’s reasonable collection potential. This revision considers only one year of future income for offers paid within five months, down from four to five years, making the option more attainable for struggling taxpayers.

Now, let’s address some frequently asked questions about the IRS Fresh Start Program:

1. Who is eligible for the Fresh Start Program?
The program is available to individual taxpayers who owe less than $50,000 and businesses with a tax liability of $25,000 or less.

2. Can I apply for the Fresh Start Program if I have already entered into an installment agreement?
Yes, if you owe less than $50,000, you can modify your existing installment agreement to take advantage of the streamlined option.

3. How does the Fresh Start Program help with tax liens?
The program increases the threshold for filing a tax lien, reducing the negative impact on your credit score and financial standing.

4. What if I owe more than $50,000 or $25,000?
While you may not qualify for the streamlined options, you can still work with the IRS to establish a payment plan or explore other options such as an Offer in Compromise.

5. How does the Offer in Compromise option work?
An Offer in Compromise allows you to settle your tax debt for less than the full amount owed. You must demonstrate that paying the entire debt would cause financial hardship.

6. Can I negotiate with the IRS to lower my penalties and interest?
Yes, under the Fresh Start Program, the IRS may reduce or waive penalties and interest in certain cases.

7. Will the Fresh Start Program affect my credit score?
The program aims to reduce the impact of tax liens on your credit score, but it does not directly affect your credit.

8. How do I apply for the Fresh Start Program?
To apply, you can use the Online Payment Agreement tool on the IRS website, call the IRS, or work with a tax professional who can assist you in the application process.

In conclusion, the IRS Fresh Start Program provides relief and assistance to taxpayers struggling with tax debts. By offering more flexible payment options, reducing penalties and interest, and expanding the eligibility criteria for certain programs, the program aims to give individuals and small businesses a fresh start in resolving their tax liabilities.
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