For months, I have been hearing radio and television advertisements about the “new” IRS Fresh Start Program. I always shake my head and chuckle when these ads broadcast. I would think to myself “If people only knew.” The fact is that the Fresh Start program has been around since 2011. Each year the IRS has made adjustments to make the program better.
So, what is the Fresh Start program? The Fresh Start program is an attempt by the IRS to relax its collection rules to allow more people to be able to repay or settle tax debts. It was created in 2009 after the recession and rolled out in 2011. The purpose of the program is to ease the burden of tax debt on the American people.
The Fresh Start program made distinct changes in the IRS’s collection practices. These changes made a significant difference for those who owe tax debt. The changes primarily focused on liens, payment plans (installment agreements), and offers in compromise (OIC). However, the changes to the OIC process were the most helpful. The calculations of an OIC were changed such that the amount required to settle with the IRS was reduced considerably. This means that the IRS has become more flexible in settling for less than what you owe.
For streamlined installment agreements, in 2012 the IRS extended the length of time for repayment. A streamlined installment agreement is an agreement to repay the total tax, including interest and penalties, over a set period of time. The beauty of a streamlined installment agreement is that you do not have to disclose any financial information to the IRS. However, you must repay the debt prior to the expiration of the collection statute (10 years). Now, streamlined installment agreements are available for tax debts up to $50,000.00. Before, the limit was $25,000.00. This equates to lower monthly payments and payment terms that are favorable to the taxpayer.
Moreover, the IRS has relaxed its thresholds on filing liens. Since the changes, the IRS will not file a tax lien if you agree to a streamlined installment agreement. Before, if the tax debt was over $25,000 a lien was filed. Now you can owe up to $50,000 and avoid a tax lien if you establish a streamlined installment agreement with direct debit. In addition, if the IRS has already filed a lien against you, you can have the lien removed if you satisfy these conditions:
1. Owe less than $25,000; 2. Enter into a direct debit installment agreement that repays the balance in full within 60 months; 3. Have not defaulted on an agreement within the last 12 months; and 4. Apply for a lien withdrawal after three payments have been made.
To qualify for the Fresh Start program, you must: be compliant with filing your tax returns; not accrue additional tax liability; and, if applicable, disclose all of your financial information to the IRS. If you think you may qualify for the Fresh Start Program, please contact a tax professional. For more information about or if you want to know if you qualify, please contact our office.