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What is the IRS Fresh Start Initiative? 

Here at Mackay, Caswell & Callahan, one of the central pillars of our practice is resolving tax debts with the IRS. We’ve helped hundreds of people resolve their back taxes with the IRS.  That allows them to continue on and move forward with their lives.  Debt may be a part of life, particularly for today’s younger Americans.  Being able to move past that debt, though, is also a part of life. It’s important that debtors be able to resolve their issue and then rebuild their financial futures. One program that let’s them do just that is the Fresh Start Initiative.  This blog post is intended to take a look at the IRS Fresh Start Initiative.  We’ll see how it can help people with existing tax debt start businesses, take new risks and lead better lives. 

We’ve spent considerable time discussing the different options debtors have to address their debt. We’ve talked about offers-in-compromise, installment plans, bankruptcy and so forth. What we haven’t yet discussed is the program specifically implemented to further assist debtors resolve their back tax debt.  This program is the Fresh Start Initiative.  It was updated and expanded in 2012 to provide tax debt relief to taxpayers with outstanding IRS obligations. The Fresh Start Initiative program essentially modifies previous program requirements.  Those programs set forth parameters which debtors needed to meet in order to qualify for IRS debt resolution.  The Fresh Start Initiative also curbs IRS aggressiveness.  That is, it reins in IRS attempts to collect back tax debt. Let’s start our review of this important program.  We’ll first take a look at the basics of the 2012 Fresh Start Initiative. 

Basics of the Fresh Start Initiative Program 

The Fresh Start Initiative makes adjustments to four things:  IRS tax liens, IRS tax penalties, installment plan agreements and offer-in-compromises. The Initiative basically provides relief for debtors who owe back taxes.  It does so for taxpayers working through one or more of these four different IRS collection methodologies. The Initiative doesn’t allow debtors to simply wipe away their existing obligations, though.  Rather, it gives them a much better chance to get back on their feet.

Looking first at tax liens, the Fresh Start Initiative increased the dollar amount that a taxpayer must owe before the IRS places a lien. Under the Initiative, the threshold for placing a tax lien was increased from $5,000 up to $10,000. It’s very important to note, however, that while $10,000 is the generally accepted threshold to place a lien, the IRS can still take action to collect back tax debt before that threshold is reached. The IRS may still issue a wage garnishment, for instance. Further, even if a taxpayer owes in excess of $10,000, the Fresh Start Initiative also allows taxpayers easier access to lien relief by showing progress toward resolving their back tax debt.

The Fresh Start Initiative also modifies the way that the IRS enforces penalties for back taxes. The IRS can impose penalties as high as 40% of the total tax debt owed, and it can also impose penalties for a variety of infractions, such as a failure to file on time, failure to file at all, failure to pay on time, and so forth. The Initiative gives taxpayers much needed relief from these penalties by granting them forgiveness of some, or all, of these penalties. Usually, taxpayers won’t receive full forgiveness, but even receiving partial forgiveness can make a world of difference for many taxpayers. 

The Fresh Start Initiative and Installment Payment Agreements

The Initiative also relaxes taxpayer eligibility requirements for installment plans. This can be a huge benefit to taxpayers, because many people who owe significant sums to the IRS can only pay them off over time. The Initiative makes it much much easier for taxpayers to qualify for a streamlined installment payment agreement. Under the Initiative, taxpayers will qualify for a streamlined installment payment agreement if they owe less than $50,000 and agree to pay it back within 72 months, or six years. If a taxpayer owes more than $50,000, or needs longer than the six years, that taxpayer can still apply for an installment payment agreement, but the process is a bit more involved and involves the completion of a collection information statement.

Lastly, the Initiative also makes it substantially easier to pursue an IRS offer-in-compromise.  Under its OIC program, the IRS will literally agree to wipe out an existing back tax debt upon payment of the agreed upon amount and continued taxpayer compliance for a period of time. Submitting an OIC to the IRS is still a difficult process even under the relaxed rules introduced with the Initiative, but now taxpayers have much the benefit of more favorable ratios and requirements to work with, just as they do with installment payment agreements. 

Work With a New York Tax Attorney You Can Trust

Debt resolution is a major part of our practice here at Mackay, Caswell & Callahan, P.C., and this is very much by design. We enjoy helping our clients resolve their tax issues and move forward with their lives. The Fresh Start Initiative plays a big role in this debt resolution process, and the attorneys here take great pride in knowing the ins and outs of this important program. If you have a tax or business law issue and you need assistance, don’t hesitate for a moment to reach out to a top New York City tax attorney here at the firm and we will get started on resolving your matter right away. 

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