The IRS offers the Fresh Start initiative program for people who owe unpaid taxes. If you’re dealing with unpaid tax debt, learning about this program could be the first step to getting on the right track with the IRS – but the IRS is very particular regarding how it handles applications for this multifaceted program.
One big misconception is that acceptance into the IRS’s Fresh Start program means that your debt is going to be instantly wiped clean from the slate. This is not typically the case. The Fresh Start initiative should be viewed as a cluster of options for repayment that allow you to avoid IRS penalties. Under this initiative, you’ll be cooperating with the IRS to get your debt settled.
How Do You Know How Much You Owe?
Figuring out exactly where you stand with the IRS is the first step to working out a settlement or repayment option. You may be dealing with muddled records and confusion if you’re trapped in a cycle of late tax payments. It can be especially difficult to understand what you owe if you haven’t stayed current with filing your tax returns. IRS fees and penalties can also make it difficult to know exactly where your current debt tally stands.
The IRS allows taxpayers to inquire about current tax debt online, by phone, or by mail. You’ll need to provide the IRS with specific information regarding your identity, address, and accounts when inquiring about your current debt balance. If you’re feeling overwhelmed regarding the process for making an inquiry, you can work with a tax professional who has done this many times before to ensure that everything is handled properly.
What Are IRS Collection Actions to Look Out For?
Unfortunately, it’s impossible to “protect” your money and assets from the IRS; it can go around you to collect funds directly from your employer or bank.
There are many ways that the IRS can try to collect on unpaid taxes, including:
- Tax liens, which establishes the government’s right to claim your property or any profits from its sale.
- Tax levies, which can seize your property directly.
- Wage garnishment, which can take a portion of your wages directly out of your paycheck.
How Does the Fresh Start Initiative Program Work?
The Fresh Start program is a channel for debt forgiveness, not a one-size-fits-all option. You’ll need to explore the specific opportunities that may apply in your case. That said, anyone who owes a tax debt of $50,000 or less to the IRS will almost certainly be qualified to initiate repayment under the Fresh Start initiative. Here’s a look at what’s addressed under a payment plan:
- The full debt amount
- Interest
- Penalties
- Tax liens
- Seizure of assets
- Wage garnishments
The comprehensive nature of the program is beneficial to anyone who would struggle to pay back a tax debt under the weight of mounting penalties, fees, and asset losses. If you pursue the Fresh Start initiative program, take a look at these three options:
An Extended Installment Agreement (IA) is a “fast-track” repayment option for anyone owing $50,000 or less to the IRS. You’ll have six years to pay off what’s owed without incurring any new interest or penalty fees if you’re approved. You also won’t have to worry about tax liens, asset seizures, wage garnishments, and related penalties as long as you stay current with your payments during the repayment window.
An Offer in Compromise (OIC) is a less common option, but it may be applicable to you if you’re able to make a convincing case to the IRS. An OIC will allow you to make an offer to settle your debt for less than you owe. The amount you are responsible for could end up being significantly less than the full value of your tax debt.
A Tax Lien Withdrawal is something to consider if the IRS has already moved forward with a lien. It is possible to have an IRS lien removed if you act before seizure activity begins. You will be required to agree to pay off your entire tax debt to the IRS using a direct repayment option. You will be permitted to formally request to have an IRS tax lien withdrawn from your account once you have set up a direct debt payment with the IRS. The big benefit of pursuing this option is that you may be able to have a lien removed before it is reported to the three major credit reporting agencies.
How Do You Know if You Qualify for the Fresh Start Initiative?
Determining whether you qualify for this program comes down to looking at your circumstances and your options. Most people with tax debts totaling $50,000 or less will likely qualify for an installment payment plan at the very least. You could qualify for a debt reduction if you can prove that paying back what you owe would make it impossible for you to meet basic life needs. It’s time to talk it out with a tax professional if you owe the IRS money.
One thing that’s guaranteed is that you will not qualify for the IRS’s Fresh Start initiative if you have any unfiled tax returns floating around. Your first priority needs to be getting current with all late tax returns. The good news is that the IRS won’t hold those returns against you once you get them filed. Make sure you’re working with a tax professional to ensure that you’re meeting all obligations and enrolling successfully in a payment plan that will serve your needs.
How Do You Apply for the Fresh Start Initiative Program?
You’re going to want to get serious about applying for the Fresh Start program as quickly as possible to ensure that you don’t incur any new fees or miss your opportunity to keep tax issues off your credit record.
First, make sure you’re current with all returns. Remember that being accepted into the Fresh Start program also means that you’re agreeing to file all future tax returns on time. Once your filings are current, it’s time to assess your circumstances to see which relief or payment option you’re going to qualify for with the IRS. The IRS will require you to complete something called an IRS Form 9465 to apply for the IRS Fresh Start initiative. You may also use the IRS’s website to enroll.
Of course, the enrollment process is by no means simple. Make sure you have a tax professional guiding you every step of the way to help you get the best outcome possible!
The Tax Group Center Can Help You Navigate the IRS Fresh Start Program
The team at the Tax Group Center helps people successfully enter the IRS Fresh Start initiative program every day. We understand the complexities of the application process because we’re tax professionals who deal with the IRS around the clock. Our experienced team of CPAs, lawyers, and tax professionals will help you to find a solution within the IRS’s generous program that works for your needs. Reach out today to put tax problems in the rearview mirror.
