The IRS Fresh Start Initiative: What Is It and How Does It Work?

If you’re unable to pay your federal income tax, you might qualify for relief by way of the IRS’ Fresh Start Initiative.

What is the IRS Fresh Start Initiative?

The Fresh Start Initiative is not a singular tax relief program. Rather, it’s a set of resolution options that allow individuals and small businesses to pay their liabilities in manageable ways. Certain criteria need to be met in order to qualify, but if you do, the Initiative can help prevent collection actions like garnishments and levies.

How Does the IRS Fresh Start Initiative Work?

The Fresh Start Initiative is based on a few primary resolution options. These include
Offers in Compromise, installment agreements, penalty abatements, and tax lien releases.

Offer in Compromise (OIC)

If you are experiencing financial hardship – such as lacking income and/or assets – you may qualify for an Offer in Compromise (OIC). An OIC is an agreement with the IRS to settle a tax debt for less than the total amount owed. Naturally, the IRS is very particular about approving OICs, and the application process is complicated. If you qualify, working with licensed tax professionals will give you the best chance of being approved for an OIC.

Installment Agreement

The IRS offers a few different types of installment agreements. All are dependent on meeting certain criteria, such as having all of your required returns filed and being current on your tax deposits. Installment agreements include:

Long-Term Payment Plans:

  • Individuals who owe $25,000 or less may qualify for a 60-month installment agreement.
  • Individuals who owe $50,000 or less may qualify for a 72-month installment agreement.
  • Businesses that owe $25,000 or less may qualify for a 24-month installment agreement.
  • Extended-Term Payment Plan: Commonly negotiated by a tax relief firm on a taxpayer’s behalf. The IRS will take your income, liabilities, and expenses into account.

Tax Lien Release

Under the Fresh Start Initiative, you can request the release of a tax lien if you’ve paid off your debt. You may also have a lien released under other conditions, such as if you owe less than $25,000 and are on track to pay it in full through a Direct Debit installment agreement within 60 months.

Penalty Abatements:

When you file and pay your taxes late, penalties and interest can accumulate dramatically. But if you meet certain criteria, you can apply to have penalties released. Common criteria for penalty abatements include being behind on your taxes for the first time, or having reasonable cause for being behind.

How Do You Qualify for the IRS Fresh Start Initiative?

You must be current on your tax filings with the correct withholding amount to qualify for the Fresh Start initiative. Getting assistance from a licensed tax professional can be helpful for both getting your filings in line and negotiating with the IRS.

IRS Fresh Start Program Requirements

Individuals may qualify for the Initiative if they agree to a direct payment installment agreement and meet the following criteria:

  • Owe less than $50,000 at the time of application
  • Current on federal tax filings
  • If self-employed, current on all estimated tax deposits
  • If a business, be current on all payroll tax deposits
  • Able to pay the tax liability within 60 months or before collection statutes expire

As part of an installment agreement, you will be required to make your monthly payments on time. Failing to do so, or accruing additional tax liability, can default the agreement.

If you want to pursue an OIC as a business owner with employees, you must be current on federal tax deposits for at least two quarters. This is in addition to the above criteria.

If you’re a small business owner, you could qualify for relief under the Fresh Start Initiative if you meet the following criteria:

  • Your business’ tax liability is $25,000 or less at the time of application
  • Current on federal tax filings and quarterly payments
  • Can repay your outstanding tax liability within 24 months
  • Haven’t been delinquent on past IRS installment plans

How to Apply for IRS Fresh Start Initiative

Applying for a program within the Fresh Start Initiative involves completing various forms and submitting relevant supporting documents. Once you’ve done this, you must send them to the IRS and appeal their decisions as necessary. This process can be complicated and time-consuming, which is why many people look for assistance with it.

Benefits of Working With A Tax Professional For The Fresh Start Initiative

Those who apply for the Fresh Start Initiative often find that one of the programs within it is particularly suitable for their situation. However, a licensed tax professional can help you weigh your options, and point out potential pros and cons that may not be immediately apparent. The team at Larson Tax Relief has decades of experience guiding our clients to their most favorable method of debt resolution. As we do so, we also deal with the IRS on our clients’ behalf, making sure the process moves along promptly and with minimal interruption by appeals.

When you choose to work with us, you are choosing a firm with a proven history of success. Our quality of service has earned us an A+ rating from the Better Business Bureau, a #1 rating in our industry by Consumer Affairs, and over 18,000 satisfied clients.

For a free evaluation, call us today at 888-589-0955 or fill out our online form below.

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