The IRS relaxed many qualifying restrictions under its Fresh Start program to make it easier for individuals to resolve their back taxes. Taxpayers can now avoid IRS collection actions, such as wage garnishments, by using the Fresh Start program. The three prime features of the program are:
- Relaxation in the placement of tax liens
- Easier access to streamlined Installment Agreements
- Less intrusive Offer in Compromise rules
Relaxed Rules for Tax Liens
Under the Fresh Start, the minimum tax debt amount that is owed before the IRS files a Notice of Federal Tax Lien has been raised to $10,000. However, in rare cases, the IRS may place a lien on debt amounts of less than $10,000 as well.
If a taxpayer, after the placement of a lien, pays the entire tax debt and meets certain other requirements, the IRS may withdraw the lien. Previously, the lien would be in place for years after the taxpayer had paid off the entire debt. To get a lien removed, taxpayers may use Form 12277, Application for Withdrawal.
Easier Access to Installment Agreements
Under the Fresh Start, more taxpayers can use Installment Agreements to resolve their tax debts. Individual taxpayers who owe up to $50,000 can pay their debt plus penalties and interest through monthly direct debit payment,s for up to 72 months (six years).
The IRS has also relaxed the rules for the sharing of financial information. The IRS will not ask for a financial statement (Form 433-F, Collection Information Statement), but may need some basic financial information to set up the installments.
Flexible Offer in Compromise Rules
Offer in Compromise (OIC) is an IRS program that allows taxpayers a reduction in tax debt. Due to the strict qualifications for an OIC, taxpayers had to undergo a difficult process of financial inspections by the IRS. The Fresh Start eased these restrictions, especially the analysis of a taxpayer’s ability to pay, to make the OIC accessible to more taxpayers.
For an OIC, the IRS will require a financial statement to determine ability to pay, but they will show more flexibility when considering such a request. Because of this, more taxpayers will be able to use the OIC to resolve their tax debts.