April 15, 2017

Denver Tax Attorney   Understanding the IRS Fresh Start ProgramNo taxpayer likes getting on the wrong side of the Internal Revenue Service. After all, the penalties for falling behind on IRS tax obligations can be severe, and may include collection methods such as garnishments, tax liens, levies, and even criminal sanctions.

 The Fresh Start program, an initiative first announced in February 2011, is a program by the IRS that primarily aims to make it easier for both individuals and small businesses to pay off any back taxes and penalties. The program initially targeted taxpayers who were struggling because of the financial crisis, providing them a way to still fully comply with the law.

The IRS has continuously made changes to the program since it was launched, increasing both advantages and thresholds for taxpayers. These changes include making it simpler to obtain lien withdrawals, increasing the minimum dollar threshold for liens significantly, and making it easier to obtain installment agreements between a taxpayer and the IRS to settle any tax liabilities.

The IRS Fresh Start program can be broken down into three essential elements:

Tax Lien Relief

A federal tax lien is a claim filed by the government against a delinquent taxpayer’s property in order to enforce a tax obligation, and to prevent a property owner from disposing of or utilizing his or her assets until all tax debts are satisfied.

Under the IRS Fresh Start program, taxpayers must owe back taxes amounting to $10,000—increased from the previous threshold of $5,000—before the agency can file a Notice of Federal Tax Lien. Depending on the specific situation, however, the IRS may opt to place a lien for taxpayers that owe less than that.

The IRS may also opt to withdraw a lien on the taxpayer’s property if a payment agreement via direct debit installments has been agreed on. If the taxpayer defaults on his or her installment payments, then the lien will be reinstated.

Installment Agreements

As part of the Fresh Start initiative, taxpayers may opt to make arrangements for installment payments spread out over up to six years through a direct debit system if they owe $50,000 or less in back taxes. Taxpayers who owe more than $50,000 in back taxes or who feel more than six years is needed to fulfill their payment agreements must provide financial statements and complete either Form 433-A or Form 433-F.

Offers in Compromise

Under the IRS Fresh Start Program, taxpayers who owe a substantial amount in back taxes may opt to settle their debt for an amount less than the full amount owed. An offer in compromise, however, is generally not accepted or approved if the IRS has reason to believe the liability may be paid through a payment agreement or in full as a lump sum. In order to determine this, the IRS examines the taxpayer’s assets and income to identify his or her reasonable collection potential. If the agency can expect to collect within a period of time deemed reasonable, the IRS will accept the offer.

 Qualifying for the IRS Fresh Start Program

In order to determine whether you are eligible for the tax relief measures offered by the Fresh Start program, you must take the following into consideration:

  • Have you been unemployed for 30 consecutive days or more during the tax year?
  • Do you earn over $100,000 a year? If married filing jointly, do you and your spouse earn over $200,000 a year?
  • If self-employed, can you establish that your net income decreased by at least 25% during the year?
  • Do you owe an outstanding balance greater than $50,000?

If you are interested in learning more about the IRS Fresh Start program, consult with an attorney as soon as possible.

Categories: Blog, IRS, Tax Tips, Taxpayers' Rights, Uncategorized