Announced in Feb 2011, the IRS Fresh Start Program has got only one aim; to assist taxpayers who are struggling to pay their back taxes. The program was designed to assist those individuals by easing policies related to federal tax liens, installment agreements and offers in compromise. But how good are these new rules? Can it really ease the taxpayer's difficulty in paying off their back tax debts? Let’s find out.
IRS Fresh Start For Federal Tax Liens
The first IRS Fresh Start Program will be the IRS Tax Lien program. The Internal Revenue Service claims it is actually doing taxpayers a favor by raising the limit of tax lien filing from $5,000 to $10,000; sounds great. But the fact is this is almost useless. And what's there for the IRS to secure something from individuals when they do not have anything to pay for? All it will do is lower their credit rating by hundred points and makes it harder to repay the IRS. The Internal Revenue Service has filed liens even if it costs the government more money to submit the tax lien than it could possibly collect. Rating: Two Thumbs down, flabby, over-hyped, and ineffective.
OIC and the Fresh Start Initiative
The IRS Fresh Start Offer in Compromise program certainly is the best way to go to settle back tax debts. New provisions within the Fresh Start program allow more flexible criteria in evaluating the taxpayers' financial ability. Especially, there is a significant change in the calculation of reasonable collection potential (RCP). The Internal Revenue Service will multiply your discretionary monthly income by 24 months instead of 60 months to figure out your future income. For example, if the OIC amount is $6,000 under the old guidelines, it will become $2400 under the new program. Furthermore, the maximum annual income level was raised from $50,000 to $100,000, permitting more taxpayers to qualify. Rating: Excellent - Two thumbs up.
IRS Fresh Start Installment Agreements
The next program is the IRS Installment Agreements. In their new rules, the threshold was increased from $25,000 to $50,000 to qualify for an installment agreement without having to provide financial information through 433-F or 433-A. The time-line for payment has also been increased from 5 years to 72 months. If the tax due is under $25,000, you can make a decision on how much your monthly payment will be. Rating: A decent program for certain taxpayers. In case your tax debt is a lot more than $50,000, your request for a reasonable payment plan starts with an IRS agent who will review your financial information and make a decision regarding the amount you can pay. This involves plenty of negotiations in between you and the IRS and this can take months to get into a formal agreement; this is where the employment of a tax attorney at law and his/her professional advice can prove useful.
The catch is getting the IRS to adhere to its own IRS Fresh Start Program rules
The IRS Fresh Start initiative does provide a practical opportunity to resolve back tax problems, but this doesn't mean that these alternatives represent a hassle-free solution. Asking for an installment agreement or submitting an offer in compromise is a kind of a lawsuit claiming that your ability to pay income taxes is limited. For that reason, you should approach it like a lawsuit that you want to win. There is no guarantee that the new relaxed rules will stay forever, so there is no better moment than now to begin negotiating with the IRS. Here is where a tax lawyer can play a significant role. A professional tax resolution attorney can help you take advantage of the Fresh Start Initiative and do all of the negotiations with the Internal Revenue Service to put your tax troubles behind you.