Tax Debt Help, Back Tax Relief
Taxpayers who owe back taxes to the IRS still hear about the IRS “Fresh Start” Initiative on the airwaves. Many advertisements also tout Fresh Start as an opportunity to settle back taxes with the IRS.
The Fresh Start Initiative began as a series of significant IRS collection policy changes in 2011/2012 to help taxpayers who were struggling to pay their back taxes. There were two major announcements of changes to IRS collection policy. All of these policy changes are still in effect today.
2011: Relaxing lien filing criteria and installment agreement terms
In 2011, the IRS made several changes that provided relief from federal tax liens and allowed more taxpayers to obtain favorable payment terms with the IRS.
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Relaxed lien-filing criteria: The IRS increased the threshold amount of outstanding taxes that would allow the filing of a tax lien. For taxpayers who were not in a qualifying installment agreement and owed back taxes to the IRS, the threshold amount increased from $5,000 to $10,000.
Ability to request lien withdrawal: Taxpayers were given the opportunity to have their tax lien withdrawn if they met certain criteria.
Expansion of payment terms: The IRS expanded its streamlined payment plans by increasing the streamlined installment agreement threshold from $25,000 to $50,000. The IRS also increased the time to pay the balance owed from 60 to 72 months. Streamlined installment agreements have always allowed taxpayers to obtain a payment plan, obtain more favorable payment terms, and critically – avoid the filing of a federal tax lien. Taxpayers who obtained a streamlined installment payment agreement are now able to avoid a tax lien if they paid by direct debit on balances between $25,000 and $50,000.
In 2011, the IRS also emphasized that taxpayers who owed any amount should be able to pay over 6-years on their current budget. Previously, IRS collection agents tried to maximize the monthly payments from taxpayers by disqualifying certain discretionary expenses from the calculation of the monthly payment amount the IRS would require. Fresh Start made it clear: If a taxpayer can pay the outstanding debt within 6-years (or the term of the collection statute, whichever is shorter), the IRS may allow discretionary expenses. The IRS calls these expenses “conditional” expenses, meaning taxpayers can have them allowed on the condition that they pay within 6 years.
2012: Changes to the Offer in Compromise Program
In 2012, the IRS made more changes. Most of these changes gave more taxpayers access to the Offer in Compromise (OIC) program.
The IRS made the OIC program more attractive because it revised the calculation of the taxpayer’s future income, allowed taxpayers to repay student loans, allowed taxpayers to pay state and local delinquent taxes, and expanded the allowable living expense category and amount. The most significant change was to reduce the amount of the offer for those who qualified for an OIC by recalculating a taxpayer’s reasonable collection potential using a shortened etime frame over which the future income is calculated.
For example, a taxpayer who qualifies for an OIC (see this article about OIC qualification) and has $500 in monthly disposable income and $5,000 in net equity in assets would see their OIC offer amount drop from $29,000 (pre-Fresh Start) to $11,000 with Fresh Start. The reason is that the Fresh Start Initiative changed IRS collection policy to lower the total number of months of income provided to the IRS from 48 to 12 months if the offered amount would be paid off in 5 months or less. If the offered amount is to be paid in 6 to 24 months, the monthly disposable income is calculated over a twenty-four month period.
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If you think that you may need help filing your 2014, 2015, 2016, 2017, 2018, 2019 & 2020 Form 1040 tax returns or past due tax returns, you may want to partner with a reputable tax relief company who can help you get the max refund and reduce your chances for an IRS AUDIT.
Advance Tax Relief is headquartered in Houston, TX with a branch office in Los Angeles, CA. We help many individuals just like you solve a wide variety of IRS and State tax issues, including penalty waivers, wage garnishments, bank levy, tax audit representation, back tax return preparation, small business form 941 tax issues, the IRS Fresh Start Initiative, Offer In Compromise and much more. Our Top Tax Attorneys, Accountants and Tax Experts are standing by ready to help you resolve or settle your IRS back tax problems.
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