IRS Fresh Start Program Helps Those Who Owe Delinquent Taxes

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Some may qualify to have their lien notice withdrawn if paying their tax debt through a Direct Debit installment agreement.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.)

Additional IRS Resources:

• Online Payment Agreement tool

• Fresh Start Notice of Federal Tax Liens

• Form 12277, Application for Withdrawal

• Understanding a Federal Tax Lien

• Offer in Compromise Pre-Qualifier tool

• Offer in Compromise

• Electronic Payment Options Home Page

• Payments (payment options)

IRS YouTube Videos:

• Online Payment Agreement 

IRS Podcasts:

• Online Payment Agreement 

Missed the Tax Deadline?

Missed the Tax Deadline?

Here is some advice for those who missed the tax filing deadline.

• File as soon as possible.  If you owe federal income tax, you should file and pay as soon as you can to minimize any penalty and interest charges. There is no penalty for filing a late return if you are due a refund.

• Penalties and interest may be due.  If you missed the April 15 deadline, you may have to pay penalties and interest. The IRS may charge penalties for late filing and for late payment. The law generally does not allow a waiver of interest charges. However, the IRS will consider a reduction of these penalties if you can show a reasonable cause for being late.

• E-file is your best option.  IRS e-file programs are available through Oct. 15. E-file is the easiest, safest and most accurate way to file. With e-file, you will receive confirmation that the IRS has received your tax return. If you e-file and are due a refund, the IRS will normally issue it within 21 days.

• Free File is still available.  Everyone can use IRS Free File. If your income is $57,000 or less, you qualify to e-file your return using free brand-name software. If you made more than $57,000 and are comfortable preparing your own tax return, use Free File Fillable Forms to e-file. This program uses the electronic versions of paper IRS forms. IRS Free File is available only through IRS.gov.

• Pay as much as you can.  If you owe tax but can’t pay it all at once, you should pay as much as you can when you file your tax return. Pay the remaining balance due as soon as possible to minimize penalties and interest charges.

• Installment Agreements are available.  If you need more time to pay your federal income taxes, you can request a payment agreement with the IRS. Apply online using the IRS Online Payment Agreement Application tool or file Form 9465, Installment Agreement Request.

• Refunds may be waiting.  If you’re due a refund, you should file as soon as possible to get it. Even if you are not required to file, you may be entitled to a refund. This could apply if you had taxes withheld from your wages, or you qualify for certain tax credits. If you don’t file your return within three years, you could forfeit your right to the refund.

IRS Resources:
• IRS Free File
• E-file Options
• Make a Payment – payment options
• Online Payment Agreement tool
• Form 9465, Installment Agreement Request