Explaining the IRS Fresh Start Program

Tax planning and managing penalties is a difficult task for many taxpayers. The IRS provides a program called the Fresh Start Program (which is no longer officially called that) that is intended to assist you in getting back on track. This blog post will serve as a comprehensive guide, explaining everything you need to know about the IRS's options for resolving tax debt.

While often referred to as the Fresh Start Program, the IRS actually uses the term "Offer in Compromise" (OIC) to describe this initiative. An OIC allows you to settle your tax debt for less than the total amount you owe. This program can be a lifesaver for taxpayers who are unable to pay their tax debt in full.

• The OIC is not a forgiveness program. You will still need to make a payment to settle your debt.
• The IRS doesn't automatically enroll you. You need to apply and meet specific eligibility criteria.

1. Tax Liens: The IRS increased the threshold for filing a Notice of Federal Tax Lien, ensuring that liens are not automatically filed for amounts below a certain threshold. This helps to protect taxpayers' credit ratings while encouraging resolution of the tax debt.
2. Installment Agreements: The Fresh Start program expanded access to streamlined installment agreements. For individuals, it increased the threshold for which taxpayers can qualify for an installment agreement without supplying detailed financial information to the IRS. This can make it easier for more taxpayers to use installment agreements to pay off their tax debt over time.
3. Offer in Compromise (OIC): Offers in Compromise allow taxpayers to settle their tax debts for less than the full amount they owe if full payment would cause them financial hardship. The Fresh Start program made changes to the OIC process to allow more taxpayers to qualify. It relaxed some of the requirements for assessing a taxpayer's ability to pay, taking into account factors such as income, expenses, and asset equity.

To be eligible for the IRS Fresh Start Program, you must meet specific criteria. The primary requirements include:

• Tax Debt Amount: The program is generally intended for taxpayers with relatively modest tax debts, typically less than $50,000. However, in some cases, the IRS may consider larger tax liabilities on a case-by-case basis.
• Income Level: You must demonstrate a moderate or low income, with a focus on individuals and small businesses that are experiencing financial hardship. The specific income thresholds can vary depending on family size and other factors.
• Employment Status: While the program is open to both employed and self-employed individuals, you must be able to provide evidence of their current income and financial situation.
• Other Financial Circumstances: The IRS will evaluate your overall financial situation, including assets, expenses, and any extenuating circumstances that may have contributed to your tax debt. This assessment helps determine the appropriate level of relief and payment options.

You must meet these basic qualifying criteria in addition to supplying plenty of supporting papers for your application, including financial statements, tax returns, income verification, and expense records. Collecting and submitting this data is an essential part of the application process.

It's crucial to remember that there are certain restrictions that come with the Fresh Start Program. The program may not be available to some taxpayers, such as those who have a history of tax fraud or evasion. The IRS retains the power to reject applications based on their evaluation of the taxpayer's financial status and ability to pay, and there are restrictions on the overall amount of debt that can be handled through the program.

The application process for the Fresh Start Program can seem complex, but here's a simplified breakdown:

• Gather Documentation: Collect documents that verify your income, expenses, and assets. This includes pay stubs, bank statements, and investment records.
• Complete Form 656: This is the official application form for the OIC program. The IRS website provides the form and instructions for completion https://www.irs.gov/payments/offer-in-compromise.
• Calculate Your Offer Amount: Determine a realistic amount you can offer to settle your tax debt. Consider consulting a tax professional for guidance on calculating a reasonable offer.
• Submit Your Application: Mail the completed Form 656, along with your supporting documentation and initial payment (usually 20% of your offered settlement amount) to the IRS designated address.

The IRS website offers an interactive tool called the "Offer in Compromise Pre-Qualifier" to help you determine if you might qualify for the program https://irs.treasury.gov/oic_pre_qualifier/.

It's important to be aware of the timelines and deadlines associated with the Fresh Start Program. You should apply as soon as possible, as processing times can vary, and there may be specific deadlines or cutoff dates for certain program elements.

If you are unsure about the application process or need assistance, seeking professional help can be invaluable.  David J Griggs can provide guidance on the program requirements, help gather the necessary documentation, and ensure the application is submitted correctly.

The IRS Fresh Start Program is a legitimate and well-established initiative overseen by the Internal Revenue Service. The program was first introduced in 2011 as a response to the financial challenges faced by many taxpayers during the Great Recession, and it has since been expanded and refined to provide more comprehensive relief options.

The IRS enforces strict guidelines for the Fresh Start Program, providing fair treatment to all applicants. Regular audits and compliance measures ensure proper use. Despite criticism and skepticism, the program has received positive feedback from taxpayers seeking financial stability. Information about the program is available on the IRS website, but beware of scams. The IRS will never demand immediate tax payment.

The IRS Fresh Start Program is still in effect and has no set end date. It's important to remember, though, that the IRS has the right to periodically evaluate and modify the program and all of its components.

As of now, the Fresh Start Program continues to be available to eligible taxpayers, and the IRS has not indicated any plans to discontinue the program in the near future. That said, the specific eligibility criteria, debt thresholds, and other program details may be adjusted over time to align with evolving tax policies and the needs of the taxpayer population.

The IRS Fresh Start Program encompasses several key components that provide different avenues for tax debt relief and management:

1. Offer in Compromise (OIC): The Offer in Compromise allows eligible taxpayers to settle their tax debt for less than the full amount owed. The IRS evaluates the taxpayer's ability to pay, taking into account their income, assets, and expenses, to determine an acceptable compromise amount.
2. Installment Agreements: For taxpayers who cannot pay their full tax debt immediately, the Fresh Start Program offers more flexible installment agreement options. This allows them to pay off the debt over time through manageable monthly payments.
3. Currently Not Collectible (CNC) Status: In cases where a taxpayer's financial situation makes it impossible for them to pay their tax debt, the IRS may designate their account as "Currently Not Collectible." This temporarily suspends collection efforts while the taxpayer addresses their underlying financial challenges.
4. Penalty Abatement: The Fresh Start Program also provides opportunities for taxpayers to request the abatement or reduction of certain penalties, such as failure-to-file or failure-to-pay penalties, based on their individual circumstances.

Once you submit your application, the IRS will review your financial situation and determine whether your offer is acceptable.  Here's a simplified breakdown of the process:

• Review and Investigation: The IRS will analyze your application, income, expenses, and assets to assess your ability to repay the full debt.
• Negotiation: The IRS may counter your initial offer with a different settlement amount they deem acceptable. You can negotiate within a reasonable range.
• Decision: The IRS will ultimately decide to accept, reject, or propose a counteroffer to your OIC application. The timeframe for this decision can vary, but it typically takes several months.

Successful participation in the IRS Fresh Start Program can lead to a range of positive outcomes and impacts for taxpayers:

1. Debt Reduction and Relief: The program's various components, such as the Offer in Compromise and installment agreements, can result in reductions in the total amount of tax debt owed, providing much-needed financial relief.
2. Improved Tax Compliance: By addressing outstanding tax liabilities and establishing more manageable payment plans, the Fresh Start Program can help you get back on track with your future tax obligations, improving your overall compliance.
3. Long-term Financial Stability: The debt relief and improved tax compliance achieved through the Fresh Start Program can contribute to your long-term financial stability, enabling you to rebuild credit, achieve your financial goals, and enjoy a greater sense of well-being.

The IRS Fresh Start Program serves as a lifeline if you are struggling with tax debts and financial challenges. By understanding its requirements, application process, legitimacy, duration, functioning, advantages, and tips for success, you can make informed decisions about your tax situation. While the program may not be a one-size-fits-all solution, it offers valuable options for achieving tax compliance and financial stability. If you have any questions,  David J Griggs can help with the application process and give you peace of mind.