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The IRS Fresh Start Program: The Tax Penalty Relief You Need

Are you letting mail pile up in order to avoid seeing IRS letterhead?

Even more, are you bogged down by IRS debt with no idea how you’ll pay what you owe?

Rest assured, you are not alone. In fact, many Americans face owed taxes every single year.

Seeking representation from a tax attorney can help lower your debt and get you on a payment plan. However, if paying that money isn’t an option for you, you may qualify for the IRS fresh start program.

If a letter from the Internal Revenue Service fills you with dread, especially if you owe back taxes or have an unpaid tax bill from a prior year, then you might think that there’s no way out.

Sometimes, taxpayers end up in financial binds and being in debt to the IRS might be something that they can’t get out of themselves. Surprisingly, the IRS has a program aimed at helping those who owe the IRS – even people who haven’t paid in years! It’s called the IRS Fresh Start Program, and it might be just the thing to help get you back on your feet financially.


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What is the IRS Fresh Start Program?​

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When you are facing the IRS coming after you for unpaid taxes, it can be extremely stressful. Many individuals, as well as small business owners are not actively and purposely dodging taxes. They’re just the average citizen trying to keep their financial heads above water. In doing so, they may have used funds allocated for taxes instead for daily living or operational costs.

The IRS, however, is generally unsympathetic to reasons for not paying taxes and instead looks for ways to assure payment of monies owed.

That said, in recent years, the IRS has taken a more realistic approach to recoup unpaid taxes. As far back as 1998 and continuing to 2021, The IRS has thankfully reformed some of their guidelines under the Fresh Start Program. We can help ensure all the proper paperwork is filed and deal with The IRS on your behalf, as your licensed attorneys.

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We’ll discuss your current financial situation and put a plan together to properly file & submit all necessary paperwork to the IRS on your behalf.

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The Top 6 Things You Should Know Regarding the IRS Fresh Start Initiative

1. Important Details Regarding Fresh Start Initiative

Notably, the IRS Fresh Start is not a single program, but rather a series of changes that the IRS has made to the tax code to alleviate tax bills. In fact, the IRS has implemented several programs around the Fresh Start to help struggling taxpayers since 2011.

This makes it easier for individuals who owe back taxes to pay the IRS, without having a lien placed on a vehicle or home. Even more, this initiative has recently expanded in 2019 to help more people struggling with tax bills.

The programs and initiatives offer collection alternatives in order to help alleviate debt. Altogether, these changes are what make up the Fresh Start Initiative.

Surprisingly, the Fresh Start IRS regulations have actually been in place for many years.
The current program is the Fresh Start Initiative, but its former name is the Fresh Start Program. Both of these have tried to help taxpayers reduce their tax bills and prevent liens against their property.

Initially, the first program started in 2008 as a response to the Recession. In 2012, the IRS changed the program, making it easier for the unemployed and those in financial hardship to reduce taxes owed. Relief can come in the form of eliminating late fee penalties for those that owe taxes for a current year, or the IRS may agree to forgive past debts.

2. The Fresh Start Initiative Can Help, Depending on Your Situation

These guidelines were put in place to entice individuals and businesses to enter into arrangements with the IRS. As a result, this will allow them to pay back taxes, avoid liens and enter into win-win agreements with the government body.

Furthermore, the IRS wants to get taxpayers out of its collection queue and receive taxes owed. With that knowledge, the Fresh Start Program achieves this by setting up realistic payment schemes, withholding penalties, and avoiding or withdrawing liens.

For instance, the Fresh Start Program increased the threshold for a lien from $5,000 to $10,000. Taxpayers can also apply to have a lien withdrawn when their taxes owed are less than $25,000, and they agree to automatic installment payments.

Simply put, there are options. Within the IRS Fresh Start Initiative program, there are different tools available to help struggling individuals and small businesses pay off and/or get rid of some of their debt. Ultimately, the goal is to allow citizens to pay taxes without liens and excess fees.

Within the Fresh Start Initiative, there are different types of relief available. Keep reading to find out what they are, and to see if you might qualify.

3. Fresh Start Initiative Eligibility

Everyone is eligible to qualify once they jump through a few tax hoops.

The Fresh Start Program has therefore made positive changes in favor of taxpayers who can jump through a few financial hoops before applying. Firstly, taxpayers need to get current. That means they have the correct amount of withholdings for the current fiscal year. When the time comes to file taxes in April or October 2019, taxpayers looking at taking advantage of the Fresh Start Program cannot have a new balance due. This is because the IRS will not give defaulters a break if they are going to end up back in their collection inventory.

Furthermore, owing taxpayers must also have filed all past tax returns usually going back six years. The IRS will not consider anyone to be current if they have unfiled tax returns, so will not sit down to negotiate under the Fresh Start Program.

These steps also go far in proving to the IRS that taxpayers do not have enough money, or assets to pay their tax debt in full but are willing to work with them to get back into good standing. Lastly, anyone who is currently in or pursuing a bankruptcy will not be eligible for any Fresh Start initiatives.

Eligibility for the Fresh Start Initiative is generally determined by several factors:

4. One Program Doesn't Fit All - Each Tax Case Is Different

First and foremost, the IRS determines if you qualify for a Fresh Start on a case by case basis. There’s a phrase “You can’t bleed a turnip,” which applies here. Essentially, the IRS will take into account a tax payer’s income, expenses, and whether or not the amount of money that they agree to accept from a reduced compromise will be greater than or equal to the amount they could realistically expect to receive from a taxpayer. Additionally, the IRS will take into account future income, as well.

There’s no one size fits all: Different options for different cases. The two main payment changes that the Fresh Start Program brought about were to Installment Agreements and Offers of Compromise.

If taxpayers cannot afford to settle their tax bill outright, then Installment Payments are a viable option. Individuals and businesses can pay back amounts owing each month over six years. There is one caveat; however, this option is only automatically available for those who owe less than $50,000 in taxes and are willing to set up a direct debit. For those who owe more than $50,000 or require longer than six years to pay, they can still be eligible for an Installment Agreement but first, have to apply for approval via a Collection Information Statement.

Often, the IRS will require financial statements and additional information which proves a taxpayer cannot pay their debt in one lump sum. This can be an advantage as it leads to the next Fresh Start Program option: Offers in Compromise. This option allows taxpayers to negotiate with the IRS to pay back less of the balanced owed. Finally, after a decision is made on what amount a taxpayer can afford based on an analysis of their current financial situation, we can reach a final amount.

There are three criteria to determine Offers In Compromise:

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5. Tax Penalties

The program can help you avoid penalties, and unravel existing ones if not approached properly.

As explained above, the Fresh Start program also allows taxpayers to avoid tax liens by setting the amount owed at $10,000 before the IRS can file a Notice of Federal Tax Lien against them. What’s more, if a lien is in place, taxpayers can apply to have it withdrawn if they enter into an Installment Agreement or have gotten their debt below the $10,000 cut off. This is a considerable advantage to individuals or businesses who are looking to sell an asset and want to avoid proceeds ending up in the IRS’s hands.

In addition, another Fresh Start Program option that is similar to Offers of Compromise is Tax Penalty Relief. Taxpayers who are facing substantial tax penalties (which can add up to 40% of the total owed), can apply to have their penalties partially forgiven, reducing their overall debt. The penalties that fall under this relief program include ones for failing to file a tax return on time, failure to pay taxes on time and others.

6. Getting in Contact With & Negotiating With The IRS

It’s not easy to negotiate with the IRS. Much less get them on the phone in under an hour.

The Fresh Start Program is free, but there are application fees that do apply depending on what part of the program taxpayers are attempting to access. For instance, those applying for an Offer of Compromise must pay a $186 filing fee as well as 20% of owed back taxes. In this way, the Fresh Start Program might not be a viable option for those taxpayers in dire financial straits.

In these cases, taxpayers might consider working with a professional tax attorney who is willing to get the groundwork prepared before taking payment. This is also a good strategy when it comes to negotiating with the IRS. Their MO is to have taxpayers pay their back taxes in a lump sum when most taxpayers who are in arrears could never afford to do so.

Importantly, a professional can help prove to the IRS that taxpayers meet the criteria for various Fresh Start Program options and negotiate their specific terms. Notably, it is worth it to pay some money to a professional tax attorney before filing a tax return or providing financial statements that the IRS can use against a taxpayer looking for some tax relief. One false step and a taxpayer can find themselves exempt from Fresh Start Program options and at the mercy of the IRS.

The above information about the Fresh Start Program should inspire taxpayers to tackle their tax debt head-on. Additionally, there are options which will help them get some relief from the constant pressure of owing money to the government. At Silver Tax Group we have helped countless taxpayers avoid the stress of tax debt, retain their wages, decrease their amounts owing and sleep soundly at night. Above all, the Fresh Start Program is an excellent start to getting your debt sorted out, and our firm can be the first step to IRS debt freedom.

What's an IRS Fresh Start Installment?

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The IRS Fresh Start Installment  plan is one of two payment plans that the IRS offers for tax debt. In short, it’s designed to reduce fees and penalties for tax bills.

The regular IRS payment options for those that can’t pay their tax bill by the deadline for that year have fees associated with them, including set-up fees and penalties.

Short-Term Plans

Short term plans may be available without late payment fees. These payment plans are less than 120 days and offer some penalties over the course of the arrangement until the balance is fully paid. Although, there are no fees associated with setting up this type of plan.

Long-Term Plans

In contrast, long-term installment payments have set-up fees, depending on whether your payment is automatically deducted from a bank account or if you submit the payment yourself. Under the Fresh Start Initiative, taxpayers can pay their bill over the course of several months and avoid penalties for unpaid taxes and other fees.

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How Long is the Fresh Start Process?

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First, beginning the process starts with a phone call with a certified tax defense attorney here at Silver Tax Group to understand your specific situation.

Then, once the process begins, it can take anywhere from several months to a year to reach a compromise or put a payment plan in place with the IRS.

More specifically, the length of time for your Fresh Start IRS agreement varies by the amount owed and your ability to make monthly payments. Terms are generally greater or less than 120 days.

In summary, a lot will depend on your ability to prove how much you can or cannot pay. You need to make sure you have the paperwork necessary (old tax forms, current paychecks, proof of non-negotiable expenses such as health care costs, etc). Next, you should provide these to your tax attorney as soon as possible, or if you are doing it yourself, make sure you have everything in order.

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Can the IRS Reopen My Debt After a Fresh Start Initiative Settlement?

In some situations, yes, they can. Unfortunately, if you fail to keep to the terms of your agreement with the IRS, your case can be reopened. This can cause a nullification of the terms and place you liable for the full amount you owe, immediately.

Many times, your agreement with the IRS not only includes complying with the terms of repayment but also that you file your taxes and pay them every year for the next five years.

Indeed, the IRS updates the tax code, including their Fresh Start Initiatives, on a regular basis. Sometimes, taxpayers that made arrangements under the tax code will be affected by changes to the code. In this case, having your agreement and annual tax filing reviewed by an experienced tax preparation company will help ensure that you’re compliant with the current regulations. Should changes to the tax code affect your agreement and ability to pay the IRS, your tax preparation specialist can help you take proactive steps with the IRS to ensure that your personal agreement isn’t disrupted.

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What Are The Debt Repayment Programs Offered?

Several different types of payment arrangements are available, including a streamlined installment agreementpartial-pay installment agreements, and “stair-step” installment agreements. Notably, while these arrangements are available, each taxpayer must negotiate with the IRS directly to determine their eligibility.

In some cases, they can reduce their tax bill, or they may arrange to pay a certain amount on time, with the remainder forgiven after a series of on-time payments. Regardless of which plan the IRS approves, it’s important to pay each installment on time and in full; otherwise, the IRS can nullify the arrangement.

Moreover, taxpayers that owe more than $50,000 and have no feasible way of repaying that amount within six years will need the assistance of a tax specialist to help negotiate with the IRS for an installment compromise.

Many plans involve showing the IRS your monthly income and budgeted essential living expenses. In short, they’ll claim the balance of your income minus expenses. Please note that even these payments come with fees. So, you will need to submit both Form 433-F and Form 9465 and do so either by mail or in person – you cannot resolve tax debt over $50,000 online.

1. Installment Agreements

For tax debts of $50,000 or less, the IRS offers installment agreements without the need to submit financial documentation. Further, you can call the IRS to set up a monthly payment agreement, or you can hire a tax professional help you with the process and potentially lower your amount due.

Taxpayers can set up flexible monthly payment plans, for up to 72 months. For debts over $50,000, the IRS still offers installment agreements but will ask for detailed financial documents. Furthermore, you’ll have to provide personal financial information such as your income and bank accounts, assets, and investments.

More importantly, keep in mind that in order to set up any kind of installment agreement, you must be up to date on all your taxes. This option is available to anyone, as long as you haven’t forgotten to file for any year.

If you missed filing for any year, you would just have to do so first, and then enter into an installment agreement for money owed.

2. Penalty Relief

Penalties and interest on taxes owed can add up quickly. If you don’t file or pay on time, these penalties continue to add up and can end up making up a huge portion of your debt owed. Through the Fresh Start Initiative, you may be eligible for the IRS to either reduce or remove acquired tax penalties altogether. A late filing penalty is 5% of additional taxes owed for every month that that owed tax still isn’t paid. And 25% is the maximum that it will accumulate to. A late payment penalty is 0.5% of additional taxes that are owed for every month that the taxes remain unpaid. For a late payment penalty, the maximum amount that penalties will accumulate to is also 25%. The interest rate for unpaid taxes is currently 5%, but it is subject to change. As long as you aren’t missing filed taxes for any year, have agreed upon some sort of a payment plan, and have no outstanding penalties for the 3 years prior to the most recent tax year, you should qualify for penalty relief.

3. Tax Liens

A tax lien is when the IRS can place a hold on your assets for a debt owed. In short, they file a document with the government that notifies the public you or your business have unpaid taxes. Specifically, the document protects the government’s right to the money that is owed.

In regards to tax liens; this is different than a tax levy in that a levy is the process of IRS taking money directly out of one’s bank account or salary until a debt is paid.

Moreover, a tax lien can quickly go to the credit bureau which can immediately have an adverse effect on credit.

In this case, tax liens can be removed either by paying a debt or paying off part of a debt, with intention and a payment plan to complete paying off the debt.

Keep in mind that no matter how much you don’t want to deal with your debt, you shouldn’t underestimate the power of the IRS. If left unattended to for too long, they can garnish your wages, seize your assets, close down your business, and tarnish your work relationships, amongst other things.

4. Offers in Compromise

An Offer In Compromise (OIC) is an agreement between the IRS and the taxpayer to agree on a lower amount. The IRS uses the RCP (reasonable collection potential) to determine what the new amount owed will be.

To arrive at the RCP, the IRS may use personal financial information like bank account and income information, car and other asset information, and properties.

Within the IRS offer in compromise, there are a couple of different payment options.

Lump Sum Cash Offer: A lump sum cash offer is when the taxpayer pays taxes owed within 5 months of an OIC being accepted.

Periodic Payment Offer: A periodic payment offer is when the taxpayer pays taxes owed in 6 or more monthly payments, within 12 months of the OIC being accepted. Keep in mind that if you miss a payment or fail to hold up your end of the agreement, the IRS can reopen your case and you can, once again, be responsible for the total amount owed.

When you receive a letter from the IRS informing you of taxes owed, it can be discouraging. Though it may be tempting to ignore those letters for as long as you can, the most important thing you can do is communicate.

It’s a program that provides different payment options for those who owe and can’t afford to pay. In order to take advantage of the program, taxes must be filed and up to date, without years of outstanding late fees and penalties. But life happens, and bills can be overwhelming. So if you do have outstanding late fees and a bill that you can’t pay, let us know.

For taxpayers who have demonstrated that they are unable to pay their tax bill in full, the IRS offers a Fresh Start Offer in Compromise. This will need the assistance of a professional tax preparation service, as negotiating with the IRS to pay less than the full amount owed can be tricky. Essentially, the taxpayer will show that paying the full amount of taxes owed will create an insurmountable financial hardship. In these cases, the IRS may forgive a portion of the amount owed. Usually, you’ll have to agree to direct withdrawal of installment payments from a bank account.

Notably, it’s important to note that compromise arrangements with the IRS are rare, and generally require the assistance of a tax professional to achieve. If you are approved, make sure that you make each payment on time and in full; otherwise, the IRS can nullify your compromise and you’ll be on the hook for the full amount owed.

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How Do I Begin the Application for The IRS Fresh Start Program?

Step 1: Gather Information

First, gather all of the tax documentation you can find from the years in question. (Can’t find everything you need? Click here (looking for the link) Armed with this information you will be able to effectively handle your tax liability. Having all the facts and circumstances in order makes it easier for a tax attorney to understand how much income tax is due.

Step 2: Consult with a Tax Attorney

Secondly, hiring a tax attorney makes it much easier for taxpayers or small businesses to pay off tax liability. Discuss your options and pick a repayment method.

Why? Because dealing with the IRS alone is like defending yourself in court: it leaves you vulnerable and increases your likelihood of losing big time. Wage garnishment, property seizures, IRS agent visits to your home and workplace…these happen every day. Property tax can be difficult to remember to pay, and that can cause tax problems too.

When it comes to repaying back taxes there are A TON of negotiations involved and showing up to an IRS negotiation without an attorney is what nightmares are made of. Trust us on this.

While you technically CAN do it alone, consider at least scheduling an appointment with a tax attorney to discuss your plan of action and listen to their advice. Trust us, it will make all the difference.

Step 3: Mail Documentation

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Thirdly, send off all the documentation you can (or have your lawyer do it) and make sure to send it not only online but also by USPS, because that post office slip is proof of the date you sent them.

Step 4: Get those IRS forms filled out

Getting IRS forms filled out can feel intimidating, but it’s not as hard as it sounds. You can find these forms on the IRS website. Plus, the Installment Agreement Request Form (Form 9465) and many others are easily available to fill out.

Step 5: Get Ready to Negotiate

Then, prepare for negotiations, and we mean to prepare for negotiations: you will be working with a specific IRS agent during this time and it is their job to get as much money as possible from you in as short of a time as possible. Consequently, you need to give your lawyer as much information as possible about your current financial situation, including bank statements, paychecks, donation receipts, etc.

Step 6: Follow Through

Despite past late payments or inability to make payments, it’s time to make your payments on time from here on out. We can help.

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In Conclusion

Ultimately, when you choose to work with a professional tax defense attorney to help gather information to negotiate, you’re also getting the benefit of knowledgeable experts with the U.S. tax code and laws. Moreover, choosing a professional to help you reach a payment arrangement with the IRS can help you reduce the amount you owe, or enter into an installment plan that isn’t overly financially cumbersome. We’re here to help! Contact Silver Tax Group here online or over the phone today to start the process.
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