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You may have heard about the Fresh Start Program under the IRS and may have wondered whether you can use it to settle your debt owed to the IRS. In order to really be sure that this program would benefit you, you need to know how exactly it works. If you are dealing with tax debt, find out if you would qualify for the IRS Fresh Start Program.
IRS Fresh Start Program Details
Even if you have never heard of the Fresh Start IRS Program, it has been around for quite some time. This program is mainly for taxpayers who owe back taxes but have no federal liens filed against them. This program was designed to give taxpayers the chance to do things right a second time, including:
- Making it simple to obtain an FTL release once a taxpayer has paid off their debt.
- The ability to withdraw FTLs more frequently when a taxpayer enters into a Direct Debit Installment Agreement.
- Making it simpler to obtain an installment agreement for small businesses.
- Increasing the dollar amount that triggered FTLs from being filed between $5,000 and $10,000 in the beginning and then to $25,000 several months later.
- Expanding the qualifications and requirements for the Offer in compromise program to make it easier for more taxpayers to use.
The IRS expanded the Fresh Start Program, making it readily available to even more individuals. Certain changes that were made to the program include:
- Expanding the amounts and types of expenses the IRS would consider (including student loans, allowable living expenses, and state and local taxes owed). The IRS would then consider how much a taxpayer would be able to afford to pay on a month-to-month basis after taking certain factors into consideration.
- Relaxing the way the IRS calculated an individual’s future income when considering an OIC.
These changes made more people become eligible to apply after the IRS began to include real-life situations and other things that can result in people falling behind on their tax debt.
Fresh Start Program Qualifications
If you can afford to pay your tax debt over a period of time using an installment agreement set up by the IRS, you can benefit from using the IRS Fresh Start Program if and when:
- You owe less than $50,000 or can afford a larger responsibility down to that amount.
- You can pay off the full amount of debt in 60 months or less.
- This is your first time falling behind on tax payments with the IRS.
- You agree to make payments using the direct payment installment agreement.
- You are up-to-date with all tax filings through the most current tax year.
- You keep the installment agreement current and stay current with the filing of your taxes each year. You also must not incur any additional tax debt during the period of the entire installment agreement.
- You file for an OIC and can afford the settlement amount and pay it off within 12 months.
An individual taxpayer may also qualify for certain bonus items if they are eligible for the Fresh Start Program if any of the below factors pertain to you:
- If you owe less than $25,000 or can afford your initial liability down below $25,000. If this is your case, you may be eligible for the removal of a federal tax lien.
- If this is your first time owing money to the IRS, you may also be eligible for an abatement of certain penalties under revised instructions.
If you are interested in learning more about the Fresh Start Program, it is advised to work with a business advisor to help you figure out whether you qualify and the ways in which you can benefit from this program.
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