Being in IRS tax debt is an overwhelming experience. The fact that you have to pay extra fees and extensive interest is stressful. With all the possible tax issues that are possible, the IRS Fresh Start Program is a blessing. It is a boon for taxpayers giving them a second chance. Whether you are suffering from a big fat tax bill or hefty back taxes, the Fresh Start Program is tailor-made for you to give you financial stability and potential relief. Let us know the IRS Fresh Start Program in detail.
What is the IRS Fresh Start Program?
The IRS Fresh Start Program, it is introduced by the Internal Revenue Service or IRS to help struggling taxpayers cope with their tax commitments. This initiative has come as a huge relief to small business houses and individual taxpayers who can now resort to manageable tax debt resolutions and easy payment plans. This program covers an umbrella of provisions such as the Offer in Compromise, Penalty Relief, and Fresh Start Instalment Agreement.
Who is eligible for the program?
Eligible taxpayers are those who are willing to pay their tax debt in instalments over a fixed length of time. Here are some other requisites for qualification for the IRS Fresh Start Program:
- Having fifty thousand dollars or less IRS debt, or the capacity to repay most of the debt.
- Capable of repaying the debt within 5 years
- Willing to pay according to the direct payment structure
- Never been a defaulter of IRS tax payments before
- Must be up to date with tax filings for the current year
- Must agree to abide by the instalment agreement
For business owners who want to initiate the program, they must
- Owe debt less than 25000, and they should repay in a time span of 2 years 10 months
- Be current with their federal employment tax filings payment
- The business should never have any back taxes failed any IRS tax payment before
Benefits of the IRS Fresh Start Program
The IRS Fresh Start Program comes with a plethora of benefits. These benefits include:
- Longer payment terms – Taxpayers get longer payment terms as per the Fresh Start Program, thus giving them a longer time frame to repay their debts while reducing financial burden.
- Simplified instalment agreements – This program offers streamlined instalment terms so that it is easier for small business houses and individuals to negotiate reasonable monthly payments.
- Penalty relief – This program greatly reduces penalties linked with outstanding tax amounts, thus, offering penalty relief to taxpayers.
- Offer in Compromise – Eligible taxpayers can opt for reducing their overall tax burden as they have the choice to settle their total tax debt for an amount less than the actual amount with an Offer in Compromise.
- Credit Score Improvement – Witht hee Fresh Start initiative resolving their tax debts, taxpayers are vulnerable to healthier financial opportunities and improved credit scores.
- Lien Withdrawal – Taxpayers who adhere to their respective payment plans and settle their tax debts successfully have the privilege to request a withdrawal of tax liens. This is helpful in showing a positive impact on their credit scores.
How to apply for the Fresh Start Program?
You need to go through a series of steps to apply for the IRS Fresh Start Program. Here is a quick overview of the entire process:
- Determine eligibility for the program- First, consult a tax professional, such as a Lawyer, CPA, or EA for the best tax advice. You can also visit the official IRS website to figure out the best option for you.
- Collect documents – Make sure you have all the required financial documents, including bank statements, tax returns, and income statements handy with you. These documents along with your application are a must to help the IRS analyze your financial situation.
- Assess payment options – Assess your financial circumstance, and determine which option you would pursue, an Offer in Compromise or an Installment Agreement.
- Submit your application – Fill up the application forms and along with the necessary documents, submit them to the IRS. Remember that any incomplete and false information will result in rejection and delay.
- Wait for IRS review – The IRS takes some time to review your application and determine your eligibility. Wait patiently through this time and maintain smooth communication with the IRS.
- Abide by instructions – As soon as your application is approved by the IRS, you need to follow all instructions and guidelines given to you. Ensure that you pay on time and fulfil all terms put forward by the IRS.
Limitations of IRS Fresh Start Program
With a wide range of relief options offered by the Fresh Start Program, it is important to consider a few of its limitations. These factors include:
- Impacts credit – You can surely resolve your debt issues with this program, but it is likely to impact your credit score and blemish your financial history.
- Chances of rejection – Your application does not guarantee acceptance. With many factors such as assets and income, taken into consideration, each case is assessed separately and stands a fair chance of either getting accepted or rejected.
- Risk of penalties – In case you fail to pay your monthly dues to the IRS, you will be liable to pay penalties and interests on the unpaid amount.
What to do if I cannot pay my taxes at all?
Here are a few things that can be done in case you cannot afford to pay any of your tax dues:
- Seek help from a tax professional – It is suggested to get in touch with helpful tax personnel who can help in strategizing a plan to clear your tax debts and give you the best tax advice.
- File an application for a payment plan – You can apply to the IRS asking for an affordable payment plan.
- File for bankruptcy – In case you are in a severe financial position, have back taxes, and are unable to meet your tax debts, then the last resort is to file for bankruptcy.
