If you owe the IRS, the Fresh Start program may give you an avenue to pay off your debts and avoid tax liens that can affect your home or business. The program, introduced in 2011, has three main components that make it easier for individuals and small businesses to pay off their back taxes. Read on to learn more about the Fresh Start program and how to find out if your situation qualifies.
When you owe taxes, the IRS calculates the amount and then sends you a Notice and Demand for Pay. If you fail to pay by the deadline, you’re subject to a federal lien. While the IRS used to issue a Notice of Federal Tax Lien for smaller debts, they have increased the cap to $10,000. That means that no lien will be issued to seize your assets until your debt exceeds that amount. In addition, when you enter into a direct debit installment agreement with the IRS to pay your back taxes, you can request to have a lien withdrawn by filing Form 12277.
Another component of the Fresh Start program is the expansion of installment agreements to additional taxpayers. If you owe up to $50,000, you can enter into a streamlined direct debit agreement for up to 72 months, giving you six years to pay off your IRS debt. The best way to apply is at IRS.gov by using the Online Payment Agreement tool. If you prefer to file via postal mail, you can do so by using Form 9465. If you owe the IRS more than $50,000, you’ll need to provide financial information to request an installment agreement by filing Form 433-A or 433-F depending on circumstances.
Offers in Compromise
In some cases, the IRS allows taxpayers to settle large tax debts for less than the total amount. With the Fresh Start program, the requirements for this program have been relaxed, making it accessible to more individuals. To determine whether you are eligible, the IRS looks at your income and assets to assess your ability to pay back the debt. To apply for this program, go to IRS.gov and use the Offers in Compromise pre-qualifier tool.
Ignoring tax debt puts you at risk of a tax lien, which can cause you to lose your home, business, or other assets. If you have tax debt, exploring these programs can take a weight off your shoulders by offering a viable, affordable solution to pay your back taxes.