IRS Fresh Start Program – Relief Options, Eligibility and how to apply?

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IRS Fresh Start Program

The IRS Fresh Start Program is an initiative by the IRS to assist taxpayers struggling to pay their taxes. The program offers various relief options, including payment plans, streamlined procedures for filing taxes, penalty abatement, and more.

IRS Fresh Start Program

The IRS Fresh Start Program is designed to assist taxpayers who are struggling to pay their taxes. Taxpayers must have filed all required tax returns for the previous three years. 

Taxpayers must not owe more than $50,000 in taxes, including interest and penalties. The program provides diverse relief choices such as payment plans, simplified tax filing procedures, penalty forgiveness, and additional options.

IRS Fresh Start Program Eligibility 

The eligibility requirements for the Fresh Start Program are:

  • The taxpayer must have filed all required tax returns for the previous three years.
  • The taxpayer must not owe more than $50,000 in taxes, including interest and penalties.
  • The taxpayer must agree to pay their taxes owed within six years.
  • The taxpayer must have made all required estimated tax payments for the current year.
  • The taxpayer must not have been involved in any tax evasion or fraud activities.

Relief Options under the IRS Fresh Start Program

The various programs within the Fresh Start Initiative offer several distinct relief options:

Offer in Compromise (OIC): 

  • This program allows you to settle your entire tax debt for a lump sum less than the total amount owed.

Streamlined Instalment Agreements: 

  • This program allows you to pay off your tax debt in monthly instalments over an extended period (typically up to 72 months) if the debt is under $50,000.

Penalty Relief Initiatives: 

These aren’t specific programs but rather approaches the IRS may take depending on your situation. Potential relief includes:

  • Penalty Abatement: Reducing or eliminating penalties for late filing or payment, often for first-time offenders with reasonable cause.
  • First-Time Penalty Abatement: Waiving penalties for taxpayers facing their first penalty offence under specific circumstances.

Currently Non-Collectible Status: 

  • If you experience significant financial hardship making payment impossible, the IRS may temporarily suspend collection efforts and place your account in “currently non-collectible” status.

Lien Review and Release: 

  • The IRS may review and potentially release tax liens placed on your assets if you can demonstrate compliance with filing and paying taxes. 
  • A likelihood of full payment through other means, and significant hardship caused by the lien.

How to apply for the IRS Fresh Start Program?

To apply for IRS Fresh Start Program, you have to go through the step-by-step instructions.

  • Head to the IRS website (https://www.irs.gov/) and navigate to the specific program you’re applying for. 
  • Each program usually has a dedicated page with application instructions and downloadable forms.
  • Most programs within the Fresh Start Initiative offer online application forms. 
  • You will need to enter your personal information, tax details, and other data relevant to your situation.
  • Once you’ve completed the online application, upload all the necessary documents electronically. 
  • The required documents might vary depending on the program chosen. 
  • It could include past tax returns, financial statements, proof of income, and hardship documentation (if applicable).
  • Once you’ve reviewed all the information and attached documents, submit the application electronically through the IRS website.

IRS Fresh Start Program Payment Options

Key points to remember:

Offer in Compromise (OIC):

  • You can choose to pay the full settlement amount in a single lump sum or spread it out in five or fewer monthly instalments.

Streamlined Instalment Agreements:

  • You must make regular monthly payments over an extended period, typically up to 72 months. 
  • The minimum payments are determined by the IRS based on your income and expenses.

Currently Non-Collectible Status:

  • While collections are temporarily suspended, you are still responsible for accruing interest and penalties on your tax debt. 
  • You may be required to make monthly payments to regain good standing and remove the non-collectible status.

IRS Fresh Start Program Benefits

The IRS Fresh Start Program offer multiple benefits to individuals and businesses dealing with tax liabilities:

Financial benefits:

  • Reduced debt: Options like Offer in Compromise allow settling the debt for a lower amount.
  • Manageable payments: Streamlined instalment agreements enable manageable monthly payments.
  • Reduced penalties and interest: Potential for penalty and interest reduction or even complete removal.
  • Improved credit score: Resolving tax debt can improve creditworthiness and access to financial resources.

Non-financial benefits:

  • Reduced stress and anxiety: Managing tax debt effectively reduces stress and anxiety.
  • Improved financial security: Taking control of tax liabilities leads to improved financial security.
  • Second chance for compliance: Programs offer a pathway to become current on tax obligations and avoid further penalties.
  • Greater peace of mind: Addressing tax debt can bring peace of mind and allow for financial planning.

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