The IRS’ Fresh Start program was launched to make it easier for taxpayers to pay back taxes and avoid tax liens. Even small business taxpayers in New York may benefit from the Fresh Start program. Below is a brief overview of the program. For more information, please contact the New York accountants at Medows CPA, PLLC.
Tax Liens. The Fresh Start program increased the amount that taxpayers can owe before the IRS will file a Notice of Federal Tax Lien. That amount is now $10,000. However, in some cases, the IRS may still file a lien notice on amounts less than $10,000.
When a taxpayer meets certain requirements and pays off their tax debt, the IRS may withdraw a filed Notice of Federal Tax Lien. Taxpayers must request this in writing using Form 12277, Application for Withdrawal.
Some taxpayers may qualify to have their lien notice withdrawn if they are paying their tax debt through a direct debit installment agreement. Taxpayers also need to request this in writing by using Form 12277.
If a taxpayer defaults on the direct debit installment agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions.
Installment Agreements. The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (six years). While the IRS will not usually need a financial statement, they may need some financial information from the taxpayer. The easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. If you don’t have internet access you may file Form 9465, Installment Agreement, to apply.
Taxpayers in need of installment agreements for tax debts more than $50,000 or longer than six years still need to provide the IRS with a financial statement. In these cases, the IRS may ask for one of two forms: either Collection Information Statement, Form 433-A or Form 433-F·
Offers in Compromise. An Offer in Compromise is an agreement that allows taxpayers to settle their tax debt for less than the full amount. The Fresh Start program expanded and streamlined the Offers in Compromise program. The IRS now has more flexibility when analyzing a taxpayer’s ability to pay. This makes the offer program available to a larger group of taxpayers.
Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer’s income and assets, to make a decision regarding the taxpayer’s ability to pay. Contact us for more information about how an Accountant in New York can help you with this issue.