What is the IRS Fresh Start Program?

In an attempt to acknowledge the significant challenges taxpayers are facing as a result of the severe economic crisis, the IRS introduced the “Fresh Start” program. The program is supposed to make it easier for taxpayers to pay back taxes and avoid tax liens. There are three important features of the Fresh Start program:

• Tax Liens.  The Fresh Start program increased to $10,000 the amount that taxpayers can owe before the IRS generally will file a Notice of Federal Tax Lien. But keep in mind there are exceptions and the IRS may still file a lien notice on amounts less than $10,000. And if you have a tax lien and meet the criteria, IRS may agree to withdraw the lien altogether which essentially erases it from your credit report. You have to make the request in writing using Form 12277.

But if you don’t pay as agreed on the Direct Debit Installment Agreement, all bets are off and the IRS will file a new Notice of Federal Tax Lien and resume collection actions.

• Installment Agreements.  The program increased the threshold for installment agreements to $50,000. You can pay through monthly direct debit payments for up to 72 months (six years). You may be able to qualify without a financial statement and it’s possible to apply for the program online.

• Offers in Compromise.  The IRS is more lenient in accepting offers to settle tax debts when the maximum amount owed is less than $50,000. And the minimum criteria for accepting offers have also been reduced.

All three represent positive news if you owe the IRS but don’t let the program fool you. All too often we see taxpayers approach the IRS with the mistaken belief that the IRS wants to help them get through a difficult financial time. The IRS is still in the business of taking your money so before you proceed with any of the above you may want to consult with your tax professional.

By: Evan A. Nielsen, Esq. (Licensed in California)