Paying the owed taxes on time is one of the basic duties of a citizen.
While the majority of the people follow the law, sometimes people who struggle financially fail to meet their tax payment deadlines. The IRS Fresh Start Program is one such initiative started by the IRS with the aim to help people with tax debt to manage their owed debt.
Here is everything that you need to know about the IRS Fresh Start Program 2023.
What is the IRS Fresh Start Program?
The IRS Fresh Start Program is an initiative by the IRS which helps taxpayers to manage their tax debts effectively. The Federal Government agencies use different collection practices like financial penalties and tax liens against people who have tax debts that they have not paid back yet.
The IRS Fresh Start Program was designed as a shield against these predatory collection practices.
The major change brought in by the IRS through their new scheme was doubling the threshold required to submit a notice for a federal tax lien. This major change implemented is thought to benefit people by helping them in having a simpler way of achieving the needed relief from their tax body.
This also seems to put an end to predatory methods like tax liens or levies for people while they get a comfortable time to repay their tax debt.
In simple words, the program helps taxpayers who have tax debt without increasing their financial hardship. The scheme works through four main program options and people should note that they should be up to date on their tax filing if they intend to receive the benefit offered by the Fresh Start Program.
What Benefits Does The IRS Fresh Start Program Offer?
The main benefit of the program is the change it can bring in the amount that is owed by the taxpayer. The owed amount can be reduced drastically, but only based on certain factors. The reduced amount will definitely lead the taxpayer to financial freedom rather than the added pressure penalties.
Some of the key benefits of the program are listed below;
- The IRS Fresh Start Program can reduce the tax debt by up to 90%
- The program can also provide a discount on penalties and interests
- Helps the taxpayer to avoid methods like Federal Tax Levitation
- Avoids Wage Garnishment
- Guarantees financial freedom
- Restores your life’s trajectory
How Does The IRS Fresh Start Program Work?
The Fresh Start Program is a scheme by the IRS that aims to help taxpayers who have tax debts to be paid but have a compatible history with the IRS.
Through the scheme, the taxpayers will be provided with a chance that allows them to pay their tax debts through an installment agreement over a period of six years.
A fixed amount will be paid by the taxpayer at fixed intervals for a fixed period of time. The amount that should be paid will be determined by taking factors like their current annual income and the value of their liquid assets into consideration.
The IRS Fresh Start Program works over four options. They are Installment Agreements, Currently Non-Collectible, Offer in Compromise, and finally Penalty Abatement.
Here is the detailed list about each of the programs:
- Installment Agreements
Through the Installment Agreement option of the IRS Fresh Start Program, the person who has a tax debt will be allowed to make affordable monthly installment payments to the IRS. The affordable amount that is being paid monthly will be directed to their pending tax debt.
The person is expected to make the payment until the debt is cleared. Even though the payment is made every month, the IRS will charge interest on the tax debt owed by the person.
It should be noted that the person who qualifies for this option should keep up with their monthly affordable payment. If you keep up with the monthly installment payment and make your third payment correctly or your tax debt falls below $25,000, then the person will be in a position to avoid other tax collection methods like tax levies or tax liens.
- Currently Non-Collectible Status
The Currently Uncollectible Status option is aimed at people who find it difficult to keep up with their tax debt payments along with their living expenses. Just like the name suggests, these options give the person a chance to put a hold on their payments during a time of financial difficulty.
It should be kept in mind that the currently non-collectible option does not forgive your tax debts but allows you to delay your payments until you are ready to manage both your living expenses and tax payments together.
- Offer In Compromise
Through the Offer In Compromise option, the individual receives the privilege to make a settlement on a reduced amount than the full amount of the owed tax, which is accepted by the IRS.
This will help the individual to reduce their tax debt and make it easier for them to handle their situation. But however, qualifying for this option is not easy as the criteria are very strict and saved for debt cases.
- Penalty Abatement
If you are a person who has received considerable penalties from the IRS for not paying your tax on time, the Penalty Abatement option might come across as a very big relief for you.
Through this option, the IRS will assess your case through a strict set of guidelines and requirements. If you qualify for those sets of criteria, then the agency will make you free of the penalties associated with your tax bill of up to $100.
Am I Eligible For The IRS Fresh Start Program?
In order to be eligible for the IRS Fresh Start Program, the individual should fully fill out a few criteria put forward by the agency. The criteria are;
- The annual income should be below $100,000 (person who is single)
- The annual income should be less than $200,000 (if the person is married). The tax debt owed should be less than $50,000.
- If you are a Sole proprietor – Income dropped by 25%
Also, you are eligible to apply for the program if you have a clean history with the IRS and have never missed any payments to the agency.
Also Read:- What Does An IRS Audit Letter Look Like & How Should You Respond?
How To Apply For The IRS Fresh Start Program?
In order to apply for the scheme, the person will need to produce documents such as;
- Student Loan Statements
- Medical Records and the relevant statement from doctors
- Birth/death certificates of an immediate member of the family
- Insurance claims
- A personal letter that explains the situation of the applicant
People who plan to apply for the scheme should also make sure that their tax filings are up to date.
