If you owe back taxes to the IRS, you may have heard of the IRS Fresh Start Program. This official tax relief program was launched in 2011 to assist taxpayers who were struggling financially in the wake of the Great Recession.
The goal of the IRS Fresh Start Program is to help taxpayers get a “fresh start” on their tax debt by lowering penalties, creating flexible payment plans, and even settling for less than the total amount owed. But is this program really legitimate? Who qualifies for it and can it provide lasting tax debt solutions?
This article will provide an overview of the IRS Fresh Start Program, eligibility requirements, benefits offered, and things to consider before applying. Read on to find out if the Internal Revenue Service Fresh Start Program could be right for your tax situation.
What is the IRS Fresh Start Program?
The IRS Fresh Start Program was created in 2011 as part of a larger government tax relief effort following the 2008 financial crisis. Millions of Americans had lost jobs, saw incomes reduced, and were falling behind on taxes owed.
To assist these taxpayers, the IRS (Internal Revenue Service) introduced the Fresh Start Program which primarily offers the following options:
1. Penalty Abatement
The IRS can abate (or remove) late filing and late payment penalties in some cases where taxpayers can show reasonable cause.
2. Flexible Installment Agreements
Taxpayers in the program can set up monthly installment plans to pay back taxes owed based on their ability to pay. The IRS considers lower incomes and waives some installment plan fees.
3. Offer in Compromise
This allows taxpayers to settle their tax debt for less than the full amount owed based on special circumstances. The Internal Revenue Service rejected most OIC applications before the Fresh Start program, but began approving more under Fresh Start guidelines.
The goal of these benefits is to help taxpayers resolve their back IRS tax debt and become compliant moving forward. It provides relief options, but applicants must meet eligibility requirements.
Who Qualifies for the IRS Fresh Start Program?
The IRS Fresh Start Program is available to individual taxpayers who meet specific criteria, including:
- Demonstrating a financial hardship such as job loss, reduced income, major medical expenses, etc.
- Owning $50,000 or less in back taxes, penalties, and interest. Higher amounts may qualify under certain circumstances.
- Having tax debt that is not a result of deliberate evasion or fraud. Owing additional money from an audit does not disqualify applicants.
- Being current on tax filing and estimated payment requirements for the previous year when applying.
- The program is not limited to W-2 employees. Self-employed taxpayers and small business owners can also qualify if they meet the above criteria. The key is proving legitimate financial difficulty due to unemployment, foreclosure, medical bills or other reasons.
What Are the Main Benefits and Options?
The primary benefits available through the IRS Fresh Start Program include:
One benefit is having late payment and filing penalties removed, if eligible. This can save anywhere from hundreds to thousands of dollars depending on the amount owed. However, the underlying tax liability remains along with accrued interest.
Flexible Installment Agreements
One major benefit is the ability to set up monthly installment plans to pay off the taxes over an extended time. Based on income, the monthly payments may be lower than outside the Fresh Start program. Some installment plan fees are also waived.
Offer in Compromise
This allows settling tax debt for less than the full amount owed based on special circumstances. The IRS looks at income, expenses, assets, and ability to pay when determining eligibility. While strict, the OIC acceptance rate is higher under Fresh Start than previously. If approved, this can reduce an IRS debt significantly.
Is the IRS Fresh Start Program Legitimate?
The short answer is yes – the IRS Fresh Start Program is an officially authorized IRS program, not a scam. It was created to provide real tax relief options following the 2008 recession.
According to the most recent IRS statistics, around 40% of applications to the Fresh Start Program are accepted. Naturally, not everyone who applies will qualify.
The key is meeting eligibility criteria and being transparent about your financial situation. The program does legitimately help those who fully meet the requirements.
While benefits are not immediate, the Fresh Start Program can provide lasting solutions for owed back taxes by reducing penalties, creating manageable payment plans, and potentially settling for less than the full amount.
Considerations Before Applying
While legitimate, there are some things to keep in mind with the IRS Fresh Start Program:
- ⦁ Applications may be rejected if all eligibility criteria are not met fully. Requirements are strict.
- ⦁ The IRS can still withhold any refunds you are due and apply them to back taxes owed. Refunds are not guaranteed.
- ⦁ Interest continues accruing on unpaid balances. The penalties may be removed but interest still builds.
- ⦁ Other IRS collection efforts may continue even while applying for the program such as wage garnishments or bank levies in some cases.
Next Steps If You Have Tax Debt
If you currently have outstanding debt owed to the IRS, here are some recommended next steps:
- Gather your records and calculate the full extent of taxes, penalties and interest owed.
- Research payment plans, penalty abatement, statutes of limitations and other options that may be available beyond the Fresh Start Program.
- Honestly evaluate if you meet all the IRS Fresh Start eligibility requirements.
- Strongly consider enlisting the help of a tax relief professional, attorney or CPA for assistance.
- If you qualify, promptly apply for the Fresh Start Program and provide accurate supporting documentation.
Getting compliant on taxes you owe is critical. The IRS Fresh Start Program can be a lifeline if you qualify. Take proactive steps to resolve IRS debt and don’t delay seeking professional guidance.
For taxpayers owing back taxes and facing financial hardship, the IRS Fresh Start Program can provide legitimate tax debt relief by reducing penalties, setting up manageable instalment payments, and potentially even settling for less than you owe.
Approval is not guaranteed, and benefits are not immediate, but the program is a viable option under the right circumstances.
Consulting a tax professional is recommended when applying to ensure you meet all requirements accurately. If you owe back taxes, be sure to understand the scope of your liability. Determine if you may qualify for the Fresh Start Program.
While not a quick fix, it can facilitate lasting solutions for resolving IRS tax debt and avoiding further collection actions. Meet with a tax relief attorney to evaluate your situation and options beyond just the IRS Fresh Start Program.