Who Can Benefit from the IRS Fresh Start Program?
The IRS Fresh Start is a tax relief program designed to help struggling taxpayers regain financial footing. A struggling taxpayer is someone experiencing financial difficulty while paying their IRS tax liabilities and basic living expenses. The
Fresh State Program provides several tax relief options to taxpayers who qualify, such as halting tax collection activities, providing penalty relief waivers, installing workable payment plans, and settling the tax balance for less than owed.
What Are the IRS Fresh Start Qualifications?
To qualify for the IRS Fresh Start Program, one must meet the following criteria:
- If filing single, your yearly income must be under $100,000.
- If filing married, your annual income must be under$200,000.
- If you are a sole proprietor, you must have experienced a drop in income of at least 25%.
- Your tax debt must be less than $50,000.
- You have not missed any payments with the IRS, and you have a clean history with the IRS.
What Does the IRS Fresh Start Program Consist of?
The IRS Fresh Start Program consists of these four types of tax relief initiatives:
- Currently Not Collectible Status
- Offer in Compromise – Doubt to Collectability
- Installment Agreements – Full and Partial Pay Plans
- Penalty Abatement – First-Time Abatement and Reasonable Cause
Each of these programs provides a unique form of IRS relief and has separate criteria for enrollment. Here is a breakdown of each program:
Program 1- Currently Not Collectible Status
Current Not Collectible Status falls under the Internal Revenue Code (Part 5. Chapter 16. Section 1), which indicates that eligibility may be met if the taxpayer cannot meet the required daily living expenses due to the collection of the liability. The IRS considers these situations in which one cannot make an entire tax payment without falling behind on one’s required living expenses, such as:
- Mortgage or rent.
- Utility bills
- And other required living costs
The tax liability is not disputed, and it’s just that; clearly, you cannot pay it along with covering your basic living needs; the IRS will deem your situation as “Currently Not Collectible,” or CNC status.
If a taxpayer is placed in a CNC status, the IRS agrees that the taxpayer cannot make any payment on their back owed debt. Being granted this status does not forgive the tax debt but delays collection while in financial hardship. The IRS will have to release any current levies in place and cannot enact them while under this status.
In addition, while in CNC status, IRS Collection Statute Expiration Date (CSED) is not tolled, which means the time the IRS must collect the assessed tax continues to run. However, penalties and interest will continue to accrue while in CNC. Being in CNC does not stop existing tax lien from remaining in place, nor does it prevent the IRS from initiating a tax lien.
However, if the taxpayer’s financial status does improve substantially, the IRS can remove the CNC status and request additional financial information.
How Does One Apply for Currently Not Collectible Status?
The IRS provides Collection Information Forms 433A, 433B, and 433F to establish your financial position for consideration. You will use the one that applies to your situation. In addition, you may be asked to provide support for data listed on the forms. It is suggested to seek professional tax help for this.
Program 2 – IRS Offer in Compromise
Another IRS Fresh Start option is an Offer-in-Compromise (OIC), a negotiated agreement between the IRS and the taxpayer intended to help taxpayers who do not have the resources to pay the tax debt. If you qualify, you may be able to settle your entire tax bill for significantly less than what you owe. You must establish that you genuinely can’t afford to pay back taxes or that doing so would cause extreme financial hardship. This can apply, for example, if you have become disabled.
You must be current on all legally required income tax returns and any estimated tax payments if you are self-employed and cannot file for bankruptcy.
The IRS would instead take an Offer-in-Compromise than send you to collections and potentially get less money. Taking an offer in compromise will not affect/impact your credit score. Accepting your Offer-in-Compromise could be a far better financial decision in the long run.
Is an Offer in Compromise Easy to Apply For?
Working out what offer to make and learning the process can be challenging. That’s like representing yourself in a court of law without a lawyer. Not ideal.
The overall taxpayer approval rate for OICs is slightly above 30%. The IRS accepted only 15,154 offers out of 49,285 in 2021. Some of the reasons for such a low overall approval rate include the following:
- applications are not correctly completed,
- the proper application of the rules of the program is not being utilized to the taxpayer’s advantage,
- taxpayers’ positions are not adequately advocated for,
- and the IRS finds that the taxpayer can pay the total liability.
Often individual taxpayers attempt the application without seeking professional tax help or relying on the IRS to help them. The IRS’s goal is to collect as much tax as possible, so there will be limitations with the help of the IRS.
A better answer is to find a tax resolution specialist that can help you with the process to see if you qualify and determine what you will have to pay. For a tax resolution specialist to represent you, they must be a licensed CPA, an Enrolled Agent, or Attorney. Each professional type provides unique professional skill sets. Will Harmon happens to be all three, which ensures you complete coverage of your tax issue.
Program 3 – IRS Installment Agreements
Another Fresh Start option is entering into one of the IRS’s various installment agreements. An IRS Installment agreement is a payment plan where you agree to pay the taxes you owe within a specified timeframe. This Fresh Start option allows you to pay off your taxes affordably. Depending upon your situation, you will choose from one of these four types of installment arrangements:
Each plan has specific criteria for approval, and speaking to a tax professional would be beneficial if you are unsure.
By requesting a payment plan, the IRS will generally be prohibited from levying, and the time it must collect will be suspended or prolonged while your installment agreement (IA) is pending. An IA request will remain pending until it can be reviewed and established, or it may be withdrawn or rejected.
Nonetheless, if your request for an IA is rejected, the collection period will remain suspended for 30 days. You have the right to appeal a rejection of your request, during which the running of the collection period will be suspended by the time the appeal is pending to the date the appealed decision becomes final.
Program 4 – IRS Penalty Abatement
The final IRS Fresh Start relief program consists of penalty abatement. Those who accumulated IRS penalties from late filing or payment may be eligible for penalty relief of up to $100, provided they meet some stringent requirements.
How Does One Apply For The IRS Fresh Start Program?
Since the IRS Fresh Start program is for financially burdened taxpayers, one must provide evidence to establish that they cannot afford to pay their tax debt by gathering specific supporting documentation to verify their dire financial situation.
For example, the IRS may request supporting documentation such as:
- Birth and death records of dependents or immediate family members.
- Student Loan Statements or other loan records
- Physician statements and medical records
- A personal statement, written under Oath, explaining your situation.
In addition, the IRS Fresh Start Program will only take applicants who are current with their tax filings and current tax payments. To get into the IRS Fresh Start program, complete any unfiled tax returns, ensure adequate tax withholding, and make correct estimated payments, if applicable.
For additional information, please see the following blogs:
- “What Are IRS Tax Resolution Services”
- “What to Know about IRS Regular Installment Agreements vs. IRS Partial Pay Installment Agreements”
- “IRS Offer in Compromise May Benefit You”
Get Trusted Professional Help with Applying for IRS Fresh Start Programs
IRS collection activities could cause you financial hardship if you cannot pay the taxes owed. You may have the option to have collections halted if you are eligible to apply for IRS Fresh Start Programs or other IRS programs. To learn which IRS tax relief program would work best for your relief from unpaid IRS taxes, contact tax attorney CPA EA Will Harmon Today by calling 772-418-0949 or completing the online contact form.
Tax Attorney-CPA-IRS EA Will Harmon has extensive experience helping taxpayers who, unfortunately, cannot afford to pay their IRS tax debt to negotiate optimal tax relief plans with the IRS. He can help you get the best outcome possible for your situation. Call Today; sleep well tonight.
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