In 2012, the IRS created the Fresh Start Initiative for taxpayers who were having trouble paying back their taxers. The initiative was meant to give those taxpayers a sense of relief and provide easier methods for paying off tax debt.
In short, the initiative did four main things. It created easier access to installment agreements and offer in compromise, allowed for higher thresholds on tax liens and introduced a new program called tax penalty relief.
Easier Access to Installment Agreements & Offer in Compromise
Installment agreements and offer in compromise were two great ways for people in tax debt to manage their debt and pay it off. Installment agreements work as a payment plan, and allow taxpayers to pay their debt in smaller increments over a period of months. An offer in compromise goes a step further, allowing taxpayers to negotiate what they owe with the IRS and gives them a chance to lower their overall payment for good. This is based off earnings and debt ratio, and the amount the IRS forgives depends on each individual case.
With the Fresh Start Initiative, installment agreements became easier to get. This means that more individuals were able to enter into a payment plan and were given six years to pay off their taxes. This is a huge relief for a large majority of taxpayers who were in deep with their tax debt without a solution. The initiative also made it easier for taxpayers to qualify for an offer in compromise, creating an easier application process and approval process.
Higher Threshold for Tax Liens
The Fresh Start Initiative also increased the minimum amount required for a tax lien. For as long as the initiative stays in place, the IRS will not put a lien on you unless you owe more than $10,000. In addition to the higher threshold, those who do have a tax lien can request to withdraw that lien once their debt amount goes below $10,000, or they agree to allow the IRS to take money from their paycheck (a Direct Debt Installment Agreement). This gives taxpayers a lot more freedom and the ability to live a more normal life without a tax lien on their record. But, still, for those who have a debt exceeding $10,000 or who enter a Direct Debt Installment Agreement and then lose their job or fail to continue paying, a lien will still be placed and collections will be after you.
Tax Penalty Relief Program
What many taxpayers don’t realize is that what you owe simply from your own tax return is often not all you have to pay the IRS once you go into debt or fail to pay. When you are late paying your taxes or filing your return, you will receive penalties which can add up quickly. In fact, some taxpayers may find that their tax bill is 40 percent tax penalties. With the Fresh Start Initiative, taxpayers are able to get help for those penalties. If eligible, the IRS will wipe your record clean of any penalties you accrued while in debt, whether that was failing to make appropriate tax deposits, failing to fill out a tax return or failing to pay your taxes on time.
If you are in tax debt and feel that you can find relief from the Fresh Start Initiative, talk with a tax professional like Levy Tax & Associates to learn more about how it can help you pay down your debt and avoid the IRS. Contact us at 1-800-TAX-LEVY or visit our website to learn more.
Levy & Associates is available for free initial consultations. We’re happy to answer any questions you have about the audit process or address any concerns about your specific situation.
There’s never a good time to be audited, and the time-consuming process will take away from your business or family if you try to face it alone. Let us handle and coordinate communication, so you can return to your daily life.