IRS Fresh Start Program

IRS Fresh Start Program

People are usually fearful of the IRS. A letter from the IRS is enough to fill them with fear, especially if they have an unpaid tax bill. They might end up in debt to the IRS and think that there is no way out of this. Thankfully, the IRS Fresh Start Program to help the taxpayers with tax resolution. Even if you have owed a debt for years, this program can help you get the tax relief.

The IRS Fresh Start Program is a tax resolution option from the IRS. The program makes it easy for taxpayers to pay their tax debt without having a levy on their assets. This is not a new initiative. It has been in place for several years. The program started in 2008 to help the taxpayers during the recession. In 2012, thanks to the changes introduced by the IRS, it became easier for the taxpayers with financial hardship to get their tax debt reduced.

Recently, the program was expanded to help people who are struggling with their tax debt. The IRS had made changes to their tax code for alleviating tax bills and helping out the taxpayers. The aim of this program is to provide tax resolution options to taxpayers. It allows them to pay back their debt without any excess fees of liens. The IRS might even forgive a certain amount of past debts or eliminate penalties for late fees.

Eligibility criteria for the IRS Fresh Start Program

  • Owe $50,000 or less money in tax debt.
  • Self-employed individuals who had a 25% or more drop in their gross income.
  • Married couples who are filing joint-returns must have income less than $200,000 in a year. In this case, the amount earned by an individual taxpayer should be less than $100,000. 

Repayment options offered through the IRS Fresh Start Program

Extended Installment Agreement

This tax resolution option reduces the fees and penalties imposed on the taxpayers. However, this need not be confused with the regular payment option.

The regular payment option is for taxpayers who are unable to pay their tax debt before the deadline, but the extended installment agreement is for taxpayers who are unable to pay penalties and other fees associated with debt before the deadline. 

There are two forms of installment plans. 

The first one is the short-term plan that is available without any fee for late payment. Also, there won’t be any fee for setting up this installment plan. These are for a period of 120 days and have penalties associated until the complete debt is paid off.

The second form is the long-term installment plan that will include some setup fees. It will depend on whether the payment is made by the taxpayers or if it is deducted automatically for the bank account.

The Fresh Start Program offers different tax resolution payment arrangements like stair-step, partial-pay, debt installment, or streamlined installment agreement. Now even though there are arrangements available, all taxpayers have to negotiate directly with the IRS for determining whether they are eligible for this or not. Depending on this, they might have to pay a certain amount over time through monthly payments. Regardless of the plan approved by the IRS, you have to ensure that every installment is paid in full and on time. Failure to do so will nullify the arrangement. 

It is important to know that these payments are accompanied by a fee. In cases of debt of $50,000 or more, it requires taxpayers to submit Form 9465 and Form 433-F via mail or in-person.

Offer in Compromise

If you are unable to pay off your debt in full, there is an Offer in Compromise option offered by the IRS. For this, you will need the help of tax experts.  Getting the IRS to agree to let you pay a reduced amount is a tricky process and requires the help of tax experts. There are several tax resolution services that can help you negotiate with the IRS.

To get your request for an Offer in Compromise accepted, you’ll have to prove to the IRS that paying their taxes will result in financial hardship. 

To determine whether you are qualified for this tax resolution option, the IRS will be checking your current and future income and expenses. Also, the IRS will first determine if the reduced amount from the offer in compromise is more or at least equal to the amount they expect to receive from the taxpayer through the collection actions. 

Here are the three criteria that can determine your eligibility:

  • Credibility

If the IRS thinks that they won’t be able to get any money from you through collection actions, they might accept your ‘offer in compromise’ request. If they think that you have assets that might get them a higher amount of money, they won’t accept your OIC. Please note that a levy on a lien can impact your credit score, affecting your ability to buy any assets or apply for a loan.

  • Liability and accuracy

This includes proving that you don’t owe the money the IRS is claiming. If you think that there was an error during tax preparation, IRS might agree to let go of the initial owed amount and take your offer. For this, you need to take the help of tax resolution services.

  • Effective tax administration

When the IRS believes that paying the complete amount will lead to severe financial hardship for you, they might accept your offer in compromise.

IRS very rarely accepts the Offer in Compromise. To make sure that you even have a slight chance at this tax resolution option, you need the help of tax experts. Once your offer is accepted, all the payments should be made in time. Failure to do so will nullify your OIC, and you will have to pay the complete amount.

Tax resolution is a way to make the process of paying taxes easier for people undergoing hardships. However, if you earn well and have assets, the IRS won’t be accepting your request. If you are going through a financial hardship, you need the help of tax resolution services to help you get back on your feet.

IRS audits Most common questions

IRS audits

No matter how honest and diligent you are, an IRS audit can send shivers down your spine. The reason for this fear is that most people believe that IRS audits will include a team of agents knocking at their front door and confiscating everything in their house. While this is also a possible situation in extreme cases, mostly, the audit will include agents checking your financial statements and ensuring that you haven’t been reporting incorrect information on your tax forms. So, unless you are over-reporting deductible expenses or reporting less income, you don’t need to worry about IRS audits.

Here are some of the most common questions asked about the IRS audits

I always make sure that my tax forms are filed without any errors? Why would the IRS still audit me?

The process of selecting a taxpayer for an IRS audit does not mean you have made an error. Many returns are randomly selected through an automated process when the 1099s and W-2s don’t match. In some cases, they are a result of an amending oversight. However, there are some red flags for the IRS. For example, large business expenses or charitable donations can raise eyebrows. 

Is the IRS audit affected by the amount I earn?

Yes, but only if you are earning is in millions. For example, if you earn more than $200,000 annually, there is a 1% probability that you will face an IRS audit. However, this probability increases when you earn more than $1 million.

Will I be notified of an IRS audit beforehand?

Yes, the IRS will send you a notice of the audit via mail.

What are the different types of IRS audits?

There are three types of IRS audits

The first one is the correspondence audit. In this audit, you will have to back up the claims made on the returns by sending additional documents. This can include mileage logs for travel, canceled checks for charities, and receipts. 

The second type of IRS audits is the in-person audit for which you will be summoned to the office of the federal agency. 

Lastly, there is a field audit. This form of the audit will be your worst nightmare. IRS agents will be visiting you at home or office and check all the tax-related documents. 

What happens when I ignore the notice of the audit?

Ignoring the notice of the IRS audit won’t make the IRS go away. Instead, the IRS will begin to think that you are hiding something. It can force the IRS to investigate immediately and impose fines or penalties. They can even get a court order to force you to cooperate. So, after you have received the notice, it is best that you respond within 30 days. 

Can the IRS only audit my last filed tax return?

No, the IRS has 3 years for pursuing an audit. So, just because the year has passed, it doesn’t mean that you are off the hook. It is possible that you receive a notice for the 2018 returns in 2020. This is why it is recommended that you keep all the tax-related documents for 3 years.

What documents do I need to provide during the IRS audit?

You only need to submit the documents requested by the IRS. If you bring anything unnecessary, it might broaden the audit’s scope. If the IRS has asked for some unaccounted paperwork, try tracing your steps. In cases of charitable donations and medical expenses, you can easily get duplicate copies.

Do I need to have tax experts present during the IRS audit?

Having tax attorneys is not mandatory during an audit. However, having a tax attorney by your side can make the whole process a lot easier for you. Hire an attorney through tax resolution services, and he will do the rest. 

After you’ve hired tax experts, you should let them do the talking. If you volunteer extra information, it can open up another investigation and compromise your advantage. 

What will be the duration of IRS audits?

The duration of IRS audits can vary. However, tax experts recommend that you set aside a complete day to deal with the audit. 

The duration of the audit will depend on a number of factors, like how organized your financial records are or how complex the issues are. In case the IRS wants more time or wants to have a follow-up meeting, you will be notified. If you want an audio recording of the proceedings, you have to give a 10-day notice to the IRS.

What penalties might I be liable to pay after the audit?

If the IRS decided that you have underpaid taxes, you might face either one of the following penalties:

  • If the IRS finds an underpayment because of undervaluation or overvaluation of the property, understating tax liability, neglecting, or disregarding rules and regulations of the IRS, you will be facing a 20% penalty.
  • For cases of serious underpayments that are related to fraud, you might face a penalty of 75%. If this is the case, it will be your responsibility to prove otherwise.
  • For all the violations made because of negligence, fraud, and not filing returns on time or valuing the property incorrectly, you might face interest payments. It will start from the due date of the return.
  • In severe cases of tax evasions, you might even face prison. 

Can the outcome of IRS audits be appealed?

If the IRS has imposed a penalty on you and you are not satisfied with the audit report, it is possible to appeal to this outcome. You will have to send an appeal letter to the IRS within 30 days after the audit proceedings ended. If the IRS denies your appeal, you can file a petition in the tax court for bills worth $50,000 or less. For the amount more than that, you will have to knock on the door or a regular court. 

For cases of IRS audits, it is best that you hire tax experts from tax resolution services. An attorney will help you put a strong foot forward. There are a number of tax resolution services in the US that can help you with your tax-related issues. IRS audit can be a complicated process with extreme outcomes. However, as long as you abide by the law, you won’t have to worry about anything.