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Understanding the IRS Fresh Start Program

The IRS Fresh Start Program is a tax relief program that encompasses multiple options to address one’s unpaid tax debt. Learn more here.

What Is the Fresh Start Tax Program With the IRS?

The IRS Fresh Start Initiative was launched in 2011 by the IRS to help taxpayers pay back taxes they owe and avoid federal tax liens. It offers different options and varying levels of tax debt relief and repayment options based on the applicants’ financial situation.

Some options may “freeze” or reduce the debt you’re carrying, while others allow applicants to pay off what they owe in smaller chunks over a certain period.

Under this program, there are three repayment options:

  • extended installment agreement
  • tax lien withdrawal
  • offer in compromise

An extended installment agreement means you can spread out your payments over a longer period of time, while a tax lien withdrawal means the IRS agrees to remove the tax lien they’ve placed on your property.

An offer in compromise is an agreement between you and the IRS that allows you to settle your debt for less than what you actually owe.

In order to decide if this program is the right option for you, you will have to talk to a tax professional. The IRS will require detailed financial information from you, which may be complicated without experienced legal help.

To help you choose an efficient and affordable IRS back tax problem solution, Hutton Tax Solutions partners with top tax attorneys in Oklahoma that will work on your behalf to get the best possible outcome.

How Does the IRS Fresh Start Program Work

The Fresh Start Initiative provides individual taxpayers and small businesses with a way to avoid penalties and pay off their outstanding debt. However, the IRS has also changed its policies with this program.

For example, the tax debt threshold is increased from $5,000 to $10,000. That means the amount of money a taxpayer can owe before the IRS files a Notice of Federal Tax Lien is increased. However, have in mind that the IRS can also file a tax lien on a taxpayer even if the debt amount is below $10,000.

Access to streamlined installment agreements is expanded, so an individual taxpayer who owes up to $50,000 can settle their debt during the period of up to six years through monthly direct debit payments. In addition, taxpayers can request their tax lien withdrawal if they meet specific criteria.

Also, the IRS expanded the Fresh Start Initiative and made it available to more taxpayers. Now, there is more flexibility when analyzing the taxpayer’s ability to pay.

The repayment plans are available to a wider range of taxpayers and the direct debit installment agreement can be used for more types of taxes such as payroll taxes.

In order to qualify for the direct debit installment agreement, an individual taxpayer must agree to make automatic monthly direct debit payments from their checking or savings account. The amount of the payment will be based on the taxpayer’s ability to pay and other factors such as the balance owed, the number of years to repay, and circumstances.

What Is Direct Debit Installment Agreement (DDIA)

The Direct Debit Installment Agreement is an agreement between the taxpayer and the IRS that allows the taxpayer to make monthly direct debit payments to pay off their tax debt. This means that the payments will be automatically deducted from your checking or savings account each month.

The main advantage of the Direct Debit Installment Agreement is that it helps taxpayers avoid missing payments and incurring additional penalties.

To qualify for the Direct Debit Installment Agreement, taxpayers must:

  • owe $50,000 or less in combined tax, interest, and penalties
  • agree to make automatic monthly direct debit payments from their checking or savings account
  • have filed all required tax returns
  • not be in an open bankruptcy proceeding

If you’re not sure whether you qualify for the Direct Debit Installment Agreement, we suggest that you talk to one of our tax professionals. We can help you determine if this is the right option for you and your unique situation.

Who Qualifies for the IRS Fresh Start Program

Not all taxpayers who owe taxes will be eligible to benefit from the IRS Fresh Start Initiative. Also, small businesses and individuals.

For example, you would be eligible if you owe less than $50,000. If you owe more, you have to be prepared to reduce your debts to qualify for this program. It must be the first time you have fallen behind on your IRS payments, and your estimated tax payments have to be up to date.

Other requirements include that you must agree to a direct payment installment agreement under which you have to agree to pay what you owe in a series of monthly payments during a certain period. You must not fall behind with your tax filings again or incur additional debt to the IRS.

However, if you are a business taxpayer, your business can’t owe more than $25,000, and you have to be able to pay off the outstanding liability within 34 months.

How Do I Apply for the IRS Fresh Start Program

If you want to apply for any of these debt relief options included in this program, you’ll have to complete the eligibility forms provided by the IRS. Make sure you complete them honestly and thoroughly. Tax professionals can ensure you apply for the best debt relief program and follow all the guidelines.

If you owe taxes or have a large IRS back tax debt, you can’t afford to be unsure what to do. Tax attorneys at Hutton Tax Solutions have been practicing tax law exclusively for almost a decade. Reach out to us for a free consultation and start resolving your IRS tax debt before it spirals out of control.