Fresh Start Program Helps Those Who Owe the IRS
The IRS Fresh Start program makes it easier to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start.
Here are three important features of the Fresh Start program:
• Tax Liens. The Fresh Start program increased the amount that taxpayers can owe before the IRS generally will file a Notice of Federal Tax Lien to $10,000. (However, in some cases, the IRS may still file a lien notice on amounts less than $10,000.)
When a taxpayer meets certain requirements and pays off their tax debt, the IRS may now withdraw a filed Notice of Federal Tax Lien. But you must request this in writing using Form 12277, Application for Withdrawal.
Some may qualify to have their lien notice withdrawn if paying their tax debt through a Direct Debit installment agreement. This too must be request in writing by using Form 12277. However, if you default on the Direct Debit Installment Agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions.
• Installment Agreements. The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (six years). While the IRS generally will not need a financial statement, they may need some financial information from you. The easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. If you don’t have Web access you may file Form 9465, Installment Agreement, to apply.
If you need an installment agreement for a tax debt of more than $50,000 or need a repayment term longer than six years - a financial statement will be required. In these cases, the IRS may ask for one of two forms: either Collection Information Statement, Form 433-A or Form 433-F.
• Offers in Compromise. An Offer in Compromise is an agreement that allows you to settle your tax debt for less than the full amount. Fresh Start expanded and streamlined the OIC program. The IRS now has more flexibility when analyzing your ability to pay. This makes the offer program available to a larger group.
Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes that you can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the your income and assets, to make a decision regarding the your ability to pay. (Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC.)
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