The Internal Revenue Service (IRS) has launched the Fresh Start Initiative, a program designed to help both individuals and small businesses who are behind on paying their federal income tax catch up on those tax payments.
The Fresh Start Initiative has made changes in how the IRS collects taxes in three primary areas as outlined below.
Increased Minimum for Filing of Tax Liens
Historically, the IRS had the option of filing a tax lien against the property of a tax holder if they owed at least $5,000 in back federal income tax that the IRS had been unable to otherwise collect. The Fresh Start Initiative has increased the minimum threshold to $10,000 that a taxpayer must owe in back taxes before it will pursue a tax lien against the taxpayer.
While the IRS still has the power to file a tax lien against the property of someone who owes less than $10,000 in extreme circumstances, the IRS will generally observe this new $10,000 floor.
The $10,000 filing threshold for tax liens does not mean the IRS will remove tax liens filed previously to collect amounts less than $10,000.
Higher Thresholds Permitted for Establishing Installment Agreements
The Fresh Start Initiative has increased the thresholds that permit the use of installment agreements to repay back taxes. Installment agreements allow a taxpayer to pay back taxes owed in a series of payments when they cannot afford to pay the tax owed as a lump sum.
The Fresh Start Initiative now allows those who owe up to $50,000 in back taxes to establish an installment agreement, whereas installment agreements previously could not be used for those who owed more than $25,000. In addition, the maximum length of the installment agreement has been increased from 60 months to 72 months.
Offer in Compromise
The Fresh Start Initiative has streamlined the processing for reviewing and accepting an Offer in Compromise. An Offer in Compromise is when the IRS, based on a review of your financial situation and determination that payment of back taxes in full would create undue financial hardship, accepts less money that the full amount of taxes actually owed.
The streamlined Offer in Compromise process includes the IRS requiring fewer financial documents to prove the financial position of the taxpayer, accepting additional information via phone rather than in writing, and more flexible payment options.
In addition, the updated process allows new IRS guidelines for determining the equity in an asset, determining taxpayer cost of living expenses, evaluating future income to consider in a taxpayer’s financial position, and reducing the Officer in Compromise process to two years.
Keep in mind the information above is general in nature and should not be considered legal advice. You should speak with a tax attorney about your individual situation.
How can you get professional help understanding if the Fresh Start Initiative can help you?
If you need help understanding if the Fresh Start Initiative can help resolve your tax situation or if you have other questions about federal income tax, you can get that help by completing the form found on this web site or by calling the phone number at the top of this page. A tax attorney who understands how the Fresh Start Initiative works and has the experience and training to evaluate your tax situation will contact you. The initial conversation is free of charge, completely confidential, and does not obligate you to anything further.
Therefore, please make the call and get the help you need today.
Mark has been a contributor to legal web sites related to bankruptcy, tax, and criminal law since 2011. He has an Accounting degree from Texas A&M University.