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Fresh Start Program – How To Start Over With the IRS

Fresh Start Program – How To Start Over with the IRS

Fresh Start ProgramThe IRS Fresh Start Program offers debt offers relief options to delinquent taxpayers.  The program makes it easier for taxpayers to pay off significant tax debt and penalties legally.  Taxpayers who are unable to pay their Internal Revenue Service (IRS) debts often find themselves in a tough situation. There are some filers who legitimately believe they do not owe the amount of tax imposed on them.  These can seek relief from the IRS’s Taxpayer Advocate Service or the Appeals Division. Unfortunately, some difficult situations can only be addressed in tax court. However, those who actually owe past taxes to the IRS, will suffer interest, penalties, and eventually liens and levies against their state tax refunds, income, and property.

With tax debt, it is more difficult to secure or retain a job, or to receive affordable credit of any type. Many tax professionals and consumer activists have criticized the IRS for failing to help consumers to pay their taxes.  There are many taxpayers that acknowledge their tax debt, but cannot currently pay it, for whatever reason.  In response, the IRS announced the development of a new project called as the Fresh Start program in 2011. This program allows individuals who owe significant past taxes to combine their tax bills.  Further, they can propose repayment schedules to pay their tax debts in a simple and orderly manner.

Fresh Start Program – How It Works

The Fresh Start program is structured to ensure that taxpayers pay off their debts in full within six years.  Hopefully, without incurring significant financial hardship. It is available to any taxpayer with a tax obligation of $50,000 or less owed to the IRS. The IRS initially established the program in 2008.  It was extended in 2012 to reduce taxpayer qualification requirements and provide additional financial options. The Fresh Start program streamlines the process of repaying substantial amounts of tax debt.  It also alleviates some of the hardships associated with owing the IRS large quantities of money.  For example, tax liens, levies, wage garnishments, and fines. The program offers three repayment options: an extended installment plan, tax lien withdrawals, and the Offer in Compromise.

Repayment options

  • Extended Installment Plan – The extended installment arrangement is the most prevalent of the alternatives.  It is intended for taxpayers who owe $50,000 or less. This option allows taxpayers to pay down their tax obligation over a period of up to six years without incurring additional fines or interest. The IRS will also put a halt to collection activities such as wage garnishment, tax liens, and tax levies. Under this arrangement, the taxpayer makes monthly payments based on their income and the value of the assets they own. The goal is to make the payments reasonable to the taxpayer so that they may be made on time and without financial hardship.
  • Tax lien withdrawal – Taxpayers can pay off their debt utilizing a direct debit payment option under the tax lien withdrawal. Once this is in place, the taxpayer can ask the IRS to remove any tax liens on their accounts. This also prevents the tax lien from being reported to the three consumer credit agencies.
  • Offer in compromise – Taxpayers may be able to settle their debt for less than they owe through the OIC program. The taxpayer submits an offer based on the worth of the assets that can be liquidated to pay off the debt. The IRS will then evaluate what they believe the taxpayer can fairly repay.  For example, the IRS will evaluate the taxpayer’s capacity to pay, current income and costs, and any asset equity. An OIC must be negotiated with the IRS and can take months for approval.  You may enlist the assistance of a tax professional to walk you through the criteria and negotiate with the IRS on your behalf. Nevertheless, only a small number of taxpayers will be able to settle their debt for a lower sum.

Fresh Start Program Offer-in-Compromise – A Closer Look

Did you know it is sometimes possible to settle your outstanding tax debt for less than you actually owe? An Offer in Compromise is a legally binding agreement between you, the taxpayer, and the IRS. The good news is that it can actually settle a tax bill for less than the whole amount owed. The offer program allows qualifying persons to pay off their tax debt. The ultimate goal is to reach an agreement that benefits both the taxpayer and the IRS. In general, you must make a reasonable offer based on the IRS’s evaluation of your true ability to pay. However, filing an application does not ensure that the IRS will accept your offer. It simply initiates the IRS’s assessment and verification process.  This takes into consideration any exceptional circumstances that may have an impact on your ability to pay.

Interested taxpayers can use the Offer in Compromise Pre-Qualifier tool. This will help to see if you qualify for an offer in compromise before filling out the paperwork.  The questionnaire format is designed to gather the information needed.  It also provides instant feedback regarding your eligibility based on the information you provide. Further, the tool will assist you in determining a reasonable preliminary offer amount for consideration.  However, submitting an application and offer is no guarantee of offer acceptance. The Pre-Qualifier tool is also located on the IRS website.

Taxpayer Advocate Service

The Taxpayer Advocate Service (TAS) is an independent entity inside the IRS.  It serves as a taxpayer’s champion and proponent. TAS assists taxpayers who are experiencing financial difficulties as a result of their tax troubles. This service is available to both businesses and individual taxpayers. It is worth trying if you’ve tried to settle your tax problem through conventional IRS channels and haven’t gotten anywhere.  Or, if you feel an IRS procedure isn’t operating properly, you may be qualified for assistance.

The IRS has adopted a Taxpayer Bill of Rights that includes 10 fundamental rights that every taxpayer has when interacting with the IRS:

  • Information – The Right to Be Informed.
  • Service – The Right to Quality Service.
  • Accuracy – The Right to Pay No More than the Correct Amount of Tax.
  • Challenge and be heard – The Right to Challenge the IRS’s Position and Be Heard.
  • Appeal – The Right to Appeal an IRS Decision in an Independent Forum.
  • Decisive – The Right to Finality.
  • Privacy – The Right to Privacy.
  • Confidential – The Right to Confidentiality.
  • Representation – The Right to Retain Professional Representation.
  • Justice – The Right to a Fair and Just Tax System.

Frequently Asked Questions

How Do I Qualify for the IRS Fresh Start Program?

The IRS created the Fresh Start tax program to be accessible to all taxpayers. There is much variation and many options within the program.  Therefore, you should be able to discover at least one good debt relief channel. However, the IRS Fresh Start initiative is complex and potentially confusing.  As a result, it is prudent to consult with a tax professional when determining the best options open to you. The only hoop you’ll have to go through is current tax returns. Before you may be considered for the Fresh Start program, the IRS requires that you be fully current on all tax returns. You must also have the proper amount of withholdings for the current fiscal year. This is the IRS’s approach of ensuring that it can rely on taxpayers to take the program seriously.

IRS Fresh Start Program Qualifications

The IRS Fresh Start tax initiative is generous and inclusive. However, there are some basic requirements to know about. Here’s what it takes to qualify:

  • Self-employed individuals must prove a drop of 25 percent in net income.
  • Joint filers can’t earn more than $200,000 annually.
  • Single filers can’t earn more than $100,000 annually.
  • Your tax balance must fall under $50,000 before the year’s end.

Ultimately, you must apply for the option that you believe is best for your situation. Just because you qualify for the Fresh Start program, the IRS will not immediately apply it to your tax liability. The IRS charges interest on tax, penalties, and interest until the debt is paid in full.  Clearly, it is in your best interest to apply or seek assistance as soon as possible.

How do I apply for the IRS Fresh Start Program?

The IRS Fresh Start initiative works by allowing you to pay your debt while avoiding penalties. To get started, you’ll need to submit the necessary application, papers, and documents to the IRS. You will next devise a strategy for the future.  This may involve monthly payments, a lump sum payment, or delayed payments. The IRS offers eligibility paperwork for each of the relief options available through its Fresh Start program. However, it is your responsibility to complete these forms completely and truthfully. You are free to enlist the assistance of a tax expert.  That may help to avoid much of the complexity and worry that may accompany the process. Also, a professional may ensure that you are adhering to all criteria and applying to the ideal program for you.  Visit the IRS Fresh Start program website for additional information.


Thousands of delinquent taxpayers struggle to make good on their tax arrears.  These individuals will benefit significantly from the Fresh Start initiative. The removal of tax liens under the conditions of this program can assist many filers in maintaining or obtaining employment.  That alone can allow them to pay off their bills in full.

Up Next: What Is a Hold Harmless Agreement?

Hold Harmless AgreementA hold harmless agreement is a legal document or clause stating that one party will not hold the other liable for damage, injury, or loss.  As a result, this type of agreement shields individuals and companies against potential litigation.  It requires the persons with whom they do business to abstain from taking legal action under specified conditions. This type of agreement prevents business owners from being sued if someone suffers damage, personal harm, or financial loss while on the business property while providing a service.

The hold harmless agreement can simply be a clause or statement within a broader contract.  Nevertheless, it absolves one or both parties of legal liability for any injuries or damage suffered by the party signing the contract. A business may add a hold harmless clause to a contract when the service being retained involves ancillary risks.  The business does not want to be held responsible legally or financially for circumstances beyond their immediate control. This clause is also known as a hold harmless provision.

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