IRS Fresh Start Program: Do You Qualify?

December 9, 2019

Tax time can be frightening, and if you’ve gotten behind in your taxes, it’s not unusual to be consumed by worry. After all, the IRS is the world’s most powerful collections agency. Ignoring their letters or hoping it will all blow over won’t work, but there are options available to you, like the IRS Fresh Start Program.

It’s important to remember that the IRS is not interested in making your life a misery. They just want their money. The best way to deal with your issue is to get a tax resolution specialist on your side and open up the lines of communication immediately to find out if you are eligible for the IRS Fresh Start Program. Here’s what you need to know:

What Is the IRS Fresh Start Program?

This program is designed to help you get back on your feet and find a way to settle your tax debt. This program offers payment alternatives and is not just for individuals: businesses can also be eligible under the right circumstances.

What the Program Does

The IRS Fresh Start Program offers relief from tax penalties, makes it possible for you to pay off your debt in installments, and gives you a higher threshold before tax liens kick in against your personal property.

Are You Qualified?

The IRS will conduct its own assessment to determine whether you are eligible for this program, and there are no guarantees. However, there are some circumstances that give you a good chance of qualifying and others that automatically disqualify you.

Your Debt Is Less Than $50,000

The Fresh Start Program was not designed to allow rich people and corporate entities to evade their tax responsibilities. It is designed for individuals and small businesses to get back on their feet after going through a tough economic time. You’re only eligible for this program if you owe $50,000 or less.

You Make Less Than $100,000

If your annual income is less than $100,000 a year or $200,000 a year for a married couple, you may be eligible for this program. If your income is higher than this, you can only become eligible if you are able to prove that paying off your whole tax liability at once would cause you undue financial hardship.

You’ve Correctly Filed Your Returns

You are only eligible for the IRS Fresh Start Program if you have been filing your annual tax returns correctly every year. Do a quick check and make sure you haven’t missed any years. If you have, file them immediately. If you can show the IRS documentation of all your tax returns, you have a much better chance of qualifying for this program.

You Have Consistent Withholdings

The IRS wants to see that you have basically consistent withholding declarations for at least six months. They want to make sure that you’re being honest about your income. Carefully keep all financial records to prove your withholdings to show that you’re being truthful and increase your chance of qualifying for the program.

You’ve Seen a Significant Drop in Income

If you are a self-employed person and have had a 25% decrease in your income or more, this is a key qualifier for the IRS Fresh Start Program. This drop in income could be because your spouse suddenly became unemployed, the result of an economic downturn, or because business dried up for 30 days or more in a row.

You Are Genuinely Unable to Pay

If you’ve had to file for bankruptcy, this goes a long way to qualify you for this program. Whether you intend to file for Chapter 13, Chapter 7, or Chapter 11 bankruptcy, your first step should be to talk to the IRS Centralized Insolvency Operations Unit and then keep them updated with all important documents and evidence. Declaring bankruptcy is difficult and unpleasant, but it does mean that the IRS will be much more forthcoming in offering you options for paying your tax debt.

Your Business Tax Deposits Are Up-to-Date

The IRS wants to see that you have been correctly withholding and paying your employees’ payroll taxes. If anything withheld from your employees’ paychecks has not gone to the IRS, this will get you in serious trouble. If you are a small business owner seeking relief under IRS Fresh Start, make sure you have proof of all your business tax deposits to qualify for the program and avoid more penalties.

You Can Prove You’re Doing Your Best

If you are self-employed or operate a small business, it’s important to show that you’re doing your best to keep up with your tax obligations. If you’ve made a good faith effort to pay what you can, even if you could not pay everything, the IRS will be much more willing to consider you for this program. If you haven’t been trying to make even part of these payments, the IRS will probably not consider you eligible for assistance unless you can prove you were genuinely unable to pay anything.

You Have a Special Situation

Have you been the victim of identity theft or are an innocent spouse who did not realize your significant other wasn’t paying the taxes? These are examples of special circumstances that may qualify you for the program.

Your Spouse Qualifies

If your spouse is eligible for this program, then you automatically qualify for it if you file taxes jointly.

What Other Options Are There?

Installment Agreement Request

Form 9465, available on the IRS website, allows you to file a request to pay off in installments. On the form, you’ll tell the IRS how much you owe and how much you can afford to pay monthly. If the IRS accepts, they will charge you a fee for the service.

The fee will be lower if you file the form online and if you make your payments by direct debit from your checking account. If you have particularly low income, the fee could be waived if you submit Form 13844. The key to having your installment agreement approved is to get started on it right away and offer to pay as much as you can possibly afford each month.

Offer in Compromise

If you filed all your tax returns and can prove you don’t have enough money to pay your debt, and that it is very unlikely you could pay it back in the next few years, you may be accepted for an offer in compromise. If you are accepted, the IRS will settle for a lower amount than your total tax debt. This is difficult to qualify for, however.

Currently Not Collectible

If you can get your tax debt classified as Currently Not Collectible, the IRS will take no action against you. You have to be able to show that you cannot pay reasonable living expenses and also afford to pay anything toward your tax debt. Be aware that if you have anything the IRS believes could be sold in order to pay part of the debt, they will require you to do this. They will also reevaluate your CNC standing on a regular basis.

What to Do Next

Dealing with the IRS can be frightening, but Geaux Tax Resolution can help you get the best resolution for your situation. Contact Geaux Tax Resolution today and let our experts get to work helping you.