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Debt seems like it’s just a fact of life. For many people, debt is overwhelming and stressful. That level of stress can be multiplied when you owe money to the IRS.
Close to 14 million taxpayers owed more than $131 billion in delinquent taxes. When you owe money to the IRS, you’ll soon find out that they don’t mess around. You could get notices saying that they will put a lien or levy on your property.
The IRS Fresh Start Initiative is a way to settle your tax debt for less than what you owe.
Keep reading to find out more about the program and whether or not you can get relief from your tax debts
What Is the Fresh Start Initiative?
The Fresh Start Initiative is a series of ways that taxpayers can catch up on their tax debt without seeing severe consequences.
When you’re late on your tax payments, the IRS has a very specific collection procedure to recover the debt. This usually comes in the form of automated letters, sent every few months.
Taxpayers who ignore the letters hoping that they’ll go away will be in for an unpleasant surprise. The IRS is a big agency, but they won’t let your account fall through the cracks.
You’ll get escalated to certified letters in the mail and the IRS can seize your home, your bank accounts, and garnish your wages to repay the debt.
In 2008, many taxpayers faced this scenario because of the recession. The IRS Fresh Start Program was created in 2011 to let delinquent taxpayers go on a payment plan and explore other methods of repayment.
In 2012, the rules were expanded to allow more people to qualify for these initiatives.
The payment plan spread out the debt over six years, which was paid in monthly installments. This was made available to taxpayers who owed $50,000 or less. Before this change, you could only go on an installment plan if you owed less than $25,000.
The program also changed the amount of tax owed for the IRS to put a lien on your home. The limit is now $10,000, up from $5,000.
Another aspect of the Fresh Start Program that saw changes in 2008 was the Offer in Compromise program. This lets you settle your debt for less than the amount owed.
The Offer in Compromise Program
One of the biggest misconceptions about the Fresh Start Program is the Offer in Compromise program.
That’s partly due to the many commercials out there that claim you can automatically settle your tax debt for pennies on the dollar if you call the number on your screen.
The offer in compromise program does allow you to pay less than what you owe. It’s a complicated process and the IRS uses specific guidelines to determine if you can settle your debt or not.
It comes down to whether or not the IRS can collect on that debt. You have the burden to prove that you can’t pay your debt.
The IRS looks at your ability to pay using three different guidelines.
The first one is Doubt as to Liability. This is where you have the tax debt but are disputing the debt.
Effective Tax Administration is used when you admit that the taxes owed is correct, you have the funds to pay, but there are special circumstances that prevent you from paying.
The most common guideline is Doubt as to Collectability. This means that you understand the debt, and acknowledge that you owe the amount claimed by the IRS. You just don’t have a way to pay the debt.
Applying for the Offer in Compromise
Does the offer in compromise program sound like a good option for you? You’ll need to start by making sure that you qualify for the program.
The IRS does have an online tool that you can use to determine your eligibility. It is a general guideline. If you want to know for sure, you should see a tax professional.
Once you know that you qualify, you have to fill out a long application.
The offer in compromise program is a long process. It can take anywhere from 6 months to 24 months to complete.
Work with a Professional
One important note to make about the offer in compromise program is that you should not do this on your own. You need to have a qualified expert look at your application and help you get the best settlement possible.
The IRS frequently rejects applications for any reason. You might leave blank spaces on the application instead of entering “0,” which would be counted as an incomplete application.
While millions of people and businesses owe money to the IRS, only 25,000 offers in compromise applications were approved by the IRS in the last year.
OIC tax services can help you present your financial situation in the most favorable light. That will improve your chances to get an offer approved.
Not only that, but your case is also going to be handled by an IRS caseworker. These caseworkers review hundreds or thousands of cases.
They frequently have to reach out to people who have the power of attorney to discuss your case with them, such as a tax professional. A tax professional that has handled many OIC cases may already be familiar with that caseworker and know what they’re looking for.
Get Relief with the Fresh Start Initiative
Millions of Americans owe money to the IRS, which can cause a lot of stress and anxiety. Fortunately, programs like the Fresh Start Initiative exist to help taxpayers get back on their feet.
There are a few components to the Fresh Start Initiative, such as an installment plan to pay back your debt and the offer in compromise program.
These programs offer a way for you to get back on your feet and get much-needed relief from IRS tax collectors.
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