IRS Tax Relief - Do You Qualify For An IRS Fresh Start?

THE IRS FRESH START INITIATIVE

THE IRS OFFER IN COMPROMISE PROGRAM


"Way back" on May 21, 2012, the IRS announced the expansion of the “Fresh Start” initiative by offering more flexible terms to settle IRS tax debt through the Offer in Compromise (OIC) program. 

The IRS Fresh Start Initiative continues to be used. The goal is to help a greater number of financially distressed taxpayers resolve their tax problems more quickly than in the past, as well as to reduce the number of tax liens issued. The Fresh Start rules make it easier for people to qualify for installment agreements and an Offer in Compromise (OIC) settlement.

IRS Fresh Start Initiative

TO QUALIFY FOR AN OFFER IN COMPROMISE, YOU DO NOT HAVE TO BE "ON WELFARE". YOU CAN HAVE A REGULAR JOB. ELIGIBILITY IS BASED ON YOUR DISPOSABLE INCOME AND IF YOU HAVE LIQUID ASSETS AND HOW MUCH THOSE ASSETS ARE.

To expand the IRS Fresh Start Initiative program, the IRS is adjusting the financial analysis used to determine which taxpayers qualify for the Offer in Compromise program. This is supposed to help make it possible for some taxpayers to resolve their tax problems in as little as two years — compared to four or five years in the past. Among other changes, the IRS is revising the calculation for the taxpayer’s future income, allowing taxpayers to repay student loans and any delinquent state or local taxes. It also expands the “allowable living expense allowance” category and amount.

THE CLIENTS AT FLAT FEE TAX SERVICE, INC. HAVE 
A 95% IRS SETTLEMENT SUCCESS RATE.

PER 2016, THE IRS APPROVED APPROX. 42% OF THE 80,000 OFFER IN COMPROMISE SUBMISSIONS.

An Offer in Compromise (OIC) is essentially a settlement agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. Before accepting your Offer in Compromise, the IRS will examine your income and assets to determine their reasonable collection potential. Note that an Offer in Compromise (OIC) is generally not accepted if the agency believes the liability can be paid in full as a lump sum or through a payment agreement.

Under the Fresh Start guidelines, when the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months — this is down from the previous requirement of four years. For offers paid in six to twenty-four months, the new guidelines are based on two years of future income (instead of five years). It’s important to remember that the IRS did emphasize that an Offer in Compromise must be fully paid within twenty-four months of the date the offer is accepted.

Other changes to the Fresh Start Initiative program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, the IRS said that equity in income-producing assets will generally not be included in the calculation of reasonable collection potential for ongoing businesses.

The IRS further noted that the allowable living expense standards (which are used to determine a taxpayer’s ability to pay) have been expanded. Allowable living expense standards now includes items such as credit card payments and bank fees and charges, payments for student loans guaranteed by the Federal government, and payments for delinquent state and local taxes.

The Fresh Start program was launched in 2008 to help individuals and businesses pay back taxes, as well as to reduce the number of federal tax liens issued. In 2008, the IRS also announced tax lien relief for people trying to refinance or sell a home, and in 2009 the agency added new flexibility for taxpayers facing payment or collection problems. In 2011, the IRS made additional changes to tax lien policies and expanded the threshold for small businesses resolving tax issues through installment agreements.

In March 2012, the IRS announced an increase in the threshold for using an installment agreement (from $25,000 to $50,000) without providing a significant amount of financial information. Taxpayers who owe up to $50,000 in back taxes can now enter into a streamlined installment agreement with the IRS to stretch their payments out over a series of months or years. The maximum length for streamlined installment agreements was raised to seventy-two months (from the previous limit of sixty months). 

Additionally, certain taxpayers who had been unemployed for thirty days or longer, or self-employed individuals who experienced a reduction in income, were given a six-month grace period on failure-to-pay penalties when filing their 2011 tax return (as long as the tax, interest, and any other penalties are fully paid by Oct. 15, 2012).

Despite your best intentions, you may need to push the proverbial Restart button with your connection with the IRS. Inadvertent errors, failure or inability to pay, or failure to submit your returns on time can jeopardize your taxpaying compliance and put at risk of fines and penalties.

Rather than ignore your tax issues or rely on outdated information about settling your debt, you may prefer to use an option that would correctly and quickly satisfy your taxpaying non-compliance. You can get the help that you need by learning if you qualify for the IRS Fresh Start program.

What is the Fresh Start Program? The IRS Fresh Start program is designed to help taxpayers repay their tax debts without incurring financial difficulties. Without this program, you may face IRS enforcement that includes:

  • IRS Wage Garnishments / Tax Levies
  • Federal Tax Liens
  • Bankruptcy
  • Repossessions

The Fresh Start Initiative is not itself a brand new program but rather an extension and expansion of existing IRS tax debt relief programs. If you qualify for IRS tax relief through the Fresh Start Initiative, your fresh start is applied in conjunction with one of the repayment or settlement options like:

  • IRS Penalty Abatement (elimination of IRS penalties)
  • IRS Installment Agreement (IRS payment plans)
  • Offer in Compromise (OIC)
  • Federal Tax Lien release
  • IRS Wage Garnishment release / IRS Tax Levy release
  • IRS Bank Levy release
  • Business or payroll tax relief
To find out if you meet the qualifications for the Fresh Start program or to request participation in it, you must fill out and submit IRS Form 1127A. This form can be found on IRS.gov but cannot be submitted electronically. You must send it to the IRS by mail.


Qualifications for the Fresh Start Program

What are the qualifications for the IRS Fresh Start program? The IRS has established specific criteria that must be met before you are allowed to utilize this program. The first qualification involves being unemployed for 30 consecutive days in 2011 or before April 15, 2012.

If you are married and file a joint return, you or your spouse must meet at least one of the qualifications as well. This courtesy comes in handy if both of you do not satisfy the criteria. The IRS allows a couple's participation in the program as long as one spouse can satisfy at least one of the qualifications.

People who are self-employed also are allowed to participate. In order for self-employed individuals to take part in the program, they must have experienced a drop in net income of at least 25 percent.

Finally, you can ask for inclusion in the program if you are married and you and your spouse earned $200,000 or less. If you are single, you must have earned $100,000 or less.

How can you take part in the program? As mentioned, you must fill out IRS Form 1127A, which can be found on the IRS' website. You must mail it in because you cannot submit it electronically.

Second, you should hire a tax professional to help you submit the necessary proof of income, assets, and other documentation that might be requested by the IRS. After you submit the documents and are approved for the Fresh Start program, it is essential that you comply with the requirements by filing your taxes and making payments on time. If you violate the terms of the Fresh Start program, you could be dismissed from it and face paying your full debt plus any penalties and interests.

The IRS gives you a second opportunity to get back into taxpaying compliance. Instead of having your income garnished, your assets seized, or face filing bankruptcy, you can settle your account and avoid financial difficulties related to your tax debt by taking part in the IRS Fresh Start program.

DO YOU WANT AN IRS FRESH START OR NOT?

IF YOU DO, CALL 1-800-589-3078

FLAT FEE TAX SERVICE, INC.

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