The Fresh Start Initiative has its beginnings in 2008 following the recession, but has had many additions and modifications over the years. Previously referred to as the Fresh Start Program, it is now called the Fresh Start Initiative, but the primary objective remains the same — to give taxpayers with unpaid tax debt more options in which they can become current with the IRS, and to enable those taxpayers to move forward with a fresh start. It is available to individuals and businesses, but with different guidelines for each.
The Fresh Start Initiative covers these 3 main provisions:
1) Extended Installment Agreement
2) Offer in Compromise.
3) Tax liens
Whether you owe individual or business taxes, if you can’t pay in a lump sum, you can negotiate to pay in increments over a longer period of time. An Installment Agreement is available if the individual owes $50,000 or less and can repay the debt with monthly installments in under 6 years. For businesses, an Installment Agreement is an option if the outstanding tax liability is $25,000 or less, and the debt is paid in full within 2 years (24 months).
Types of installment agreements include:
• Guaranteed – Tax debts of less than $10,000 and repaid in three years or less.
• Streamlined – Tax debts of less than $50,000 and repaid in six years or less.
• Partial Pay – Similar to an offer in compromise. Taxpayers make monthly payments until the collection time expires.
• In Business – Tax debts of less than $25,000 and paid in 24 months or less.
• Routine – Larger amounts and longer repayment periods.
If you have substantial tax debt and no ability to pay, you may be able to settle that debt for less than you owe. The Offer in Compromise (OIC) option is a consideration if you don’t have assets or income that would allow you to pay the tax debt.
OICs are divided into three types:
• Doubt as to Collectability – This type of OIC is the most common. It is an option if you owe back taxes and cannot pay them, even if you sold your assets and/or paid in installments within the IRS’s timeframe to collect (generally 10 years from the time of the tax assessment).
• Doubt as to Liability – If you have a legitimate dispute about your tax liability, you can file Doubt as to Liability. You must be able to provide documentation supporting your claim. Often this filing results in a response from the IRS that resembles an audit.
• Effective Tax Administration – This type of OIC would apply if collection of the full liability would create economic hardship (as defined byTreasury Regulation 301.6343-1), or exceptional circumstances exist that would make collection of the full liability detrimental to voluntary compliance.
If you owe more than $10,000 and do not have an installment agreement, the IRS will generally file a tax lien. (However, depending upon the circumstance, the IRS may file a tax lien even if you owe less than $10,000.) Additionally, if you owe more than $50,000, it is an almost certainty that the IRS will file a tax lien, even if you have an installment agreement.
The Fresh Start Initiative now allows for tax liens to be withdrawn once a taxpayer’s IRS debt is paid below the $10,000 threshold.
Also, you can request that the lien be withdrawn if you’re an individual who owes less than $25,000, and agrees to pay the IRS every month via an automatic bank account debit, and pays for three consecutive months under the direct-debit installment agreement.
Qualification for a Fresh Start from the IRS is done on a case by case basis. The Fresh Start Initiative is an umbrella phrase that covers the provisions (and more) described above, so any tax laws and changes mentioned under the Fresh Start Initiative are commingled with the IRS’s convoluted tax code. Nothing is going to be straightforward or simple. When negotiating with the IRS in these matters, a tax attorney aggressively representing your best interests is an invaluable ally.