IRS Fresh Start Program Initiative – Ways to Settle Back Taxes

For those who qualify, the IRS Fresh Start Initiative offers a way to pay back taxes without putting too much of a strain on your finances. But what is the fresh start program, who qualifies, and how does it work for you?

What is the Fresh Start Program Initiative?

This is a plan by the IRS to get taxpayer to pay their full tax amount in several payments as opposed to one. Called the Fresh Start Initiative, it provides a path that allows taxpayers to settle their back tax debts faster and easier compared to previous methods. Previously called the Fresh Start Program, it represents a change to the collection procedure used by the IRS for certain qualified taxpayers.

How Long as the Fresh Start Program Been Around?

The IRS first initiated the program back in 2008 as a way for tax payers to resolve issues that put their finances in trouble without resorting to tax liens or levies. In 2012, the program was altered to account for those who were unemployed or in difficult financial straits. One change was the elimination of penalties for failure to pay taxes in a timely manner due to being unemployed for more than 30 days. A six-month extension was added for individuals who were unemployed, so that no penalties would be accrued during that time.

How Does It Work?

There are two tax payment plans, the Installment Agreement and the Offer in Compromise. The Fresh Start Initiative allows for both methods depending on your current financial situation.

Installment Agreement: For individuals who cannot pay their taxes in full, the IRS will institute an installment agreement that allows you to pay off the tax debt in smaller payments due each month. Although the debt is stretched out, it does eliminate tax liens or levies which were previously used to obtain the money which was owed.

The Installment Agreement does have some flexibility, although there is a minimum amount that the IRS will demand to be paid per month. Some of the different agreements include the following;

  • Streamlined
  • Partial Pay
  • Stair-Step

Offer in Compromise: This is a different procedure that is covered in another article, but essentially it is a negotiated settlement that allows you to pay out your tax debt in a different manner. You should consult with a professional tax representation firm that can offer the right advice about whether this is the proper method for you.

Get a free case evaluation today at 877-788-2937.

What If I Owe a Considerable Amount?

If your tax debt is greater than $50,000 and you cannot pay it off in a six-year timespan, then an installment agreement will have to be negotiated with the IRS. It is advisable that you seek out the assistance of tax professionals, enrolled agents, CPAs, lawyers who are familiar with this type of situation. It may be possible to negotiate a reduced payment depending on your current income, but that is through another program, the Offer in Compromise.

Can Small Business Owners Use Fresh Start?

Yes. If you run a small business and your company owes less than $25,000 in back taxes, then you can take advantage of the program. This is called the In-Business Trust Fund Express Installment agreement and if approved, you have up to 34 months to pay off your tax debt. In addition, if your debt is between $10,000 and $24,999, you must choose the Direct Debit Installment Agreement. This is a great option for small businesses that have run up tax debt in their first few years of operation.

However, if you owe $25,000 or more, you will have to choose a different method to pay back your taxes if you are running a small business.

Are There Fees Involved?

Yes, there are fees with all installment agreements. The fees are usually added to the monthly payment, so you need to account for that when you calculate how much in total needs to be paid back. The IRS standard fee for the installment agreement currently sits at $120. However, if you choose to pay online that fee may be reduced.

How Can I Make Payments Under the Installment Agreement?

You do have options in the method of paying back your tax debt. What follows are the most common methods, but the IRS may offer others depending on your circumstances;

  • Online
  • Check or Money Order
  • Credit Card
  • By Phone
  • Direct Debit through Checking Account

Keep in mind that payments which are made automatically carry the advantage that you will not forget to make the payment in the first place. Check, money order, or by phone runs the risk of forgetting which can put you in trouble with the IRS.

What Happens if I Miss a Payment?

If you miss a payment, then the IRS may revoke the agreement made for the Fresh Start Initiative and use other methods to collect the money. However, depending on the reasons why the payment was missed, there may be other responses the IRS will use. Revocation is just one option for the IRS, so keep that in mind if you know you will miss a payment. This is why the Direct Debit option is preferred because all you need to do is keep enough money in your account.

Should I Seek Professional Assistance?

That depends on the situation you are in with the IRS. If the amount of money owed is relatively small and you can pay it back immediate, then you may not need the help of a professional tax firm. However, if the situation is more complicated, then having the right people, enrolled agent, CPA, lawyer by your side may make all the difference.

Our professional tax representation firm provides the specialized knowledge and experience needed to guide you through the process of the Fresh Start Program Initiative with the IRS. We can help negotiate the amount you pay each month, protect your rights under the law, and perhaps even have the amount reduced depending on your circumstances. If you are unsure, then calling a reputable tax representation firm is a good way to get the right advice.

Get a free case evaluation today at 877-788-2937.

Client Reviews
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