One of the most common methods to reduce tax debt is to apply for the IRS Fresh Start Program. The IRS Fresh Start program is designed to help struggling taxpayers pay overdue taxes. It is a great opportunity for taxpayers who are struggling with their tax debt and have tried all other means to settle their accounts.
The Fresh Start Program
All the IRS wants is to get the money they’re owed as quickly as possible in a reasonable way. That’s why the IRS Fresh Start Program is here to help delinquent taxpayers pay off their debt in installment over six years.
The amount of money you need to pay every month will vary because your current income and liquid asset value will be considered. With this, you get a higher chance to pay off your taxes.
The Fresh Start Program is open to people with a tax debt of less than $50,000. It offers three repayment options, along with waivers for unemployed taxpayers.
The Repayment Options
As mentioned, the Fresh Start Program offers three repayment options:
- Extended Installment: This is designed for individuals who owe less than $50,000 in taxes. The debt must be paid within six years and the penalties and interest will be frozen as long as the payments are on time.
- Offer in Compromise: This is when a taxpayer can settle their debt immediately through a compromise. In this case, the percentage will be based on the assets and the conduct of the taxpayer. However, this is best for those with standing assets but want to clear their debts to make way for an upcoming investment or loan application.
- Tax Lien Withdrawal: This is when the taxpayer pays off the entire tax debt through a direct deposit repayment. Then, the taxpayer will have to formally request to have the tax lien eliminated in place of the alternative payment. One of the best things about this repayment option is that it will not reflect on credit reports; therefore, it’ll be easier for you to apply for loans.
How to Apply for the Fresh Start Program
Make sure all your back and current tax returns are filed and the IRS has your financial information. When you have all of these sorted out, go to the IRS website and use the Online Payment Agreement tool and select the repayment option for you.
On the other hand, you can also apply through the mail via the IRS Form 9465 you can get at a tax professional office or online.
Factors That Affect Your Eligibility
There are several factors that the IRS consider before they grant you access to the Fresh Start Program:
- Credibility: The IRS will make sure that you are credible to stick to the repayment plan of your choice. With this, they will look into your financial history.
- Accuracy & Liability: The IRS will also look into your debts to ensure that they are accurate. You will be surprised that many taxpayers can reduce their debt by arguing a tax preparation error.
- Compassion & Payment Plan: The IRS will also evaluate what may happen if you pay the full debt immediately or have your assets seized. When they find that these options will cause hardship for you, they will likely give your case preference.
Get Rid of Tax Debts
Fresh Start is an IRS program that allows people who owe a tax debt to settle without penalties, interest or the additional 10% levy. The main benefit of Fresh Start is that it allows people who can’t pay off old tax debt to get rid of it once and for all.