IRS Fresh Start & Debt Forgiveness
Earlier this year, the Internal Revenue Service (IRS) rolled out its Fresh Start Initiative, aimed at helping struggling taxpayers. The Fresh Start Initiative lives up to its name, allowing qualified taxpayers to avoid IRS Failure to File penalty and give them a fresh start. Qualified individuals can request a six-month payment extension in which no penalties will accrue on unpaid tax balances. Late payment penalties will be charged if the balance is not paid by October 15. Fresh Start provides a different installment structure, allowing taxpayers to avoid financial reviews and Federal liens. The IRS Fresh Start Initiative combines a number of features to help taxpayers who owe back taxes. Call the professionals at Allied Tax Advisory to find your best options for relief.
Tax Penalty Relief – Do you Qualify?
Qualifying taxpayers can petition to have tax penalties waived for six months. This means the payment period is extended from April 15th to October 15th without accruing a late penalty. Check out the qualifications below to see if you can apply for Fresh Start.
- Taxpayers must file Form 1127A, which must be paper filed as it is not available electronically. Fresh Start is limited to those taxpayers whose balance is not more than $50,000. Taxpayers can not earn more than $200,000 per year for married couples or more than $100,000 for individuals. Individuals who are self-employed need to be able to show at least 25 percent of a drop in their income. Married couples (filing jointly) need to have only one spouse who meets the qualifications. You must have been unemployed for a minimum of 30 consecutive days during 2011 or before April 15, 2012.
Increase in the Notice of Federal Tax Lien Filing Threshold
The increase in the IRS Notice of Federal Tax Lien filing threshold holds to be one of the biggest improvements in the Fresh Start Program. The minimum liability for filing a tax lien has increased from $5,000 to $10,000. This change will help protect thousands of taxpayers each year.
Installment Payment Plans
Due to the Fresh Start Initiative, the threshold for taxes owed in order to qualify has increased to $50,000. The new initiative provides taxpayers with an option to pay in monthly direct debit installments. Taxpayers can pay for up to six years. For those that owe over $50,000, the Installment Payment Plan is still feasible by paying off the remaining portion then using the payment plan for the amount equal or lesser to $50,000.
Offer in Compromise
The Offer in Compromise allows taxpayers to settle federal tax debts for less than what is owed. Payments can be made in either installments or a single lump sum pay. The Fresh Start Initiative allowed loosened standards for taxpayers eligible for the Offer in Compromise. This allows those to settle IRS back taxes for less than the full amount due.
Offer in Compromise Tax Relief Eligibility:
- You must have filed all required tax forms and paid current year taxes in full. You must not be in an open bankruptcy. Your offer amount can be paid in one of two ways:
- Period Payment: Your first monthly payment is submitted with the offer application. Then, you must continue to pay the IRS every month while the offer package is being evaluated. If the offer is accepted, you must pay the remaining balance within 24 months.
- Lump Sum Cash Payment: Your first payment includes 20% of the total offer amount with your application. If your offer is accepted, the remaining balance is paid in up to five payments.
If you are unsure about eligibility for the IRS Fresh Start Program, give the trusted professionals at Allied Tax Advisory a call for a Free Consultation with one of our IRS experts.