How to Get a Fresh Start With the IRS

If you have tax debt, liens and/or levies don’t panic. You have options.

One of the best potential opportunity you have at your disposal is the IRS Fresh Start Initiative. Originally initiated in 2011, the IRS Fresh Start Program makes it easier to resolve tax debt and avoid tax liens and levies.

About the IRS Fresh Start Program

There are several aspects of the initiative that all taxpayers should be made aware of:

Tax Liens

The IRS has increased the minimum liability for filing a tax lien from $5,000 to $10,000. IRS tax liens may still be filed on back taxes below $10,000 when needed, however this change will help protect tens of thousands of taxpayers every year. Since the Fresh Start Tax Lien change is not retroactive, the IRS cannot automatically withdraw a lien that was previously filed based on the old threshold amount.

As part of the Fresh Start initiative, the IRS may now issue a “withdrawal” of a tax lien that was previously filed after the lien has been “released”.  In general, a lien release occurs after an IRS tax balance is reduced to zero. Although released, the lien remains on your credit report and other records for approximately seven years. A lien withdrawal will help remove the lien from your records and assist you in repairing your credit score and obtaining future loans.  Lien withdrawals must be made in writing using IRS Form 12277 Application for Withdrawal.

Installment Agreements

The Fresh Start program has also made it easier for taxpayers to qualify for an IRS streamlined installment agreement. As a result of the program, the dollar criteria for streamlined payment plans has been raised from $25,000 to $50,000 and the maximum payoff term has been raised from 60 months (5 years) to 72 months (6 years).

Under the IRS streamlined payment plan, debts must be paid within the 72 month payment period or prior to the Collection Statute Expiration Date (CSED), whichever is earlier. As with regular installment agreements, Fresh Start payment plans require a taxpayer to be in current compliance with filing, tax withholding, and/or estimated tax payments.

The IRS Fresh Start Tax Settlement program has made it easier for taxpayers to qualify for an Offer-In-Compromise.

Here’s what you need to know about the Fresh Start offer-in-compromise program:

To qualify for an IRS tax settlement, the agency will consider your income, expenses, assets, and ability to pay. 

  • You must be current with all tax return filings and payments.

  • You must not be in an open bankruptcy proceeding.

  • Your offer amount can be paid one of two ways:

    • 1) Lump Sum Cash Payment – Your first payment must include 20 percent of the total offer amount with your application. If your offer is accepted, the remaining balance is paid in five or fewer payments.

    • 2) Period Payment – Your first monthly payment is submitted with your offer application and you must continue to pay the IRS every month while you offer package is being evaluated. If your offer is accepted, you must pay the remaining balance within 24 months.

In the event a tax settlement offer is rejected, any initial and subsequent payments made while the offer was being considered are applied to the taxpayer’s back taxes.

The IRS charges a fee of $186 to process your offer-in-compromise application.

The Fresh Start Offer-in-Compromise program is not for everyone. If you owe back taxes to the IRS and are considering a tax settlement, be sure to contact us for a FREE initial review of your tax situation.

Contact JLD Tax & Accounting today to get started on giving yourself a Fresh Start!