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A Complete Guide to the IRS Fresh Start Program

We provide a complete guide to the IRD Fresh Start Program.

Posted: 12th September 2023 by Finance Monthly
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The IRS Fresh Start Program was created to offer a convenient option to individuals and small corporations that are struggling with paying taxes. This program has been greatly beneficial for several individuals, but it is crucial to understand both the pros and cons before you hop on. Today, we shall look closely at what this program covers, including its positives and drawbacks. So, keep reading below. 

IRS Fresh Start Program Overview

The IRS Fresh Start Program was launched by the United States Internal Revenue Service. It aids taxpayers and small enterprises with outstanding tax dues. Its purpose is to simplify the process of repaying taxes and help protect taxpayers from forceful IRS collection methods. 

Installment Agreements

The Fresh Start Program expanded access to short-term and long-term payment plans. This allows taxpayers to make smaller monthly payments over a longer duration.

Tax Liens

The program increased the threshold at which the IRS generally files a Notice of Federal Tax Lien. This means that the IRS will not file a lien unless the taxpayer owes more than $10,000, which is up from the older threshold of only $5,000.

Offers in Compromise (OIC)

Taxpayers have the opportunity to resolve their tax payments for a reduced amount through this program. The IRS deploys a more lenient approach in assessing a taxpayer's payment capacity. This expands the option of OICs to a larger audience.

Penalty Relief

For unemployed taxpayers, the program provides relief from penalties. If you are unemployed for 30 consecutive days or greater, or if you are self-employed and face a 25% reduction in income, you may qualify for this relief.

The Fresh Start Program was designed to give taxpayers in debt a "fresh start" with their tax obligations. It is generally a good idea to consult with a tax professional to understand all the nuances and benefits available for your specific situation.

Advantages of the Fresh Start Program

Simpler Access to Installment Agreements

More taxpayers can use the instalment agreement option under this program. This means paying back taxes becomes more manageable.

Greater Lien Threshold

Before the Fresh Start Program, the IRS could file a tax lien for owed amounts as low as $5,000. The program increased this threshold to $10,000, giving taxpayers more ease.

Extended Payment Time

The program extended the time to pay from 5 to 6 years. This provides more time for taxpayers to pay their dues easily.

Help for Financially Unstable Individuals 

The Fresh Start Program made it easier for taxpayers to settle their tax debts for less than the full amount they owe. The IRS now looks more favourably upon OICs by offering an option for those who are to pay their tax debt. For certain unemployed taxpayers, the program offers a 6-month grace period from the failed penalty payments.

Disadvantages of the Fresh Start Program

Not Suitable for Everyone

The Fresh Start Program is designed primarily for individual taxpayers who owe up to $50,000 and businesses that owe up to $25,000. Those with larger debts might not find this program as beneficial.

Accumulating Interest

While instalment agreements can make payments more manageable, interest continues to accrue on the outstanding balance. This results in greater overall debt.

Demands Strict Adherence

If you are under an instalment agreement and miss a payment, the IRS can reject your agreement. The IRS can also enforce more aggressive collection actions.

OIC Acceptance Is Not Definite 

While the program has made it easier to apply for an OIC, not all offers are accepted. The IRS will evaluate your ability to pay, income, expenses, and asset equity to decide.

Possible Public Scrutiny

When the IRS accepts an OIC, it is a public record. Some taxpayers might not be comfortable with their financial situations being publicly available.

Endnote

The IRS Fresh Start Program offers several benefits for taxpayers facing financial troubles. Make sure to consult a tax professional before you proceed to make sure you understand the tax complexities and what best fits your current financial condition. 

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