In 2011, the Internal Revenue Service announced the launch of Operation Fresh Start. In response to the economic hardship created by the “Great Recession,” the Service launched this program to provide taxpayers with new and easier ways to address their tax liabilities.
Under the new program, the IRS will generally remove a notice of federal tax lien for any taxpayer whose liability is below $25,000 and is making monthly installment payments.
Streamline installment Agreements
Before the Fresh Start initiative, most taxpayers were required to complete complex collection information statements to determine their ability to make payments based on a calculation of disposable income. Now, an individual with a tax liability beneath $50,000 may qualify for a streamlined agreement. A streamlined installment agreement requires the taxpayer to pay off the liability via monthly payments spread over 72 months. If a taxpayer qualifies for this plan, the IRS will not require any additional information about income or assets.
Offer in Compromise
Recognizing the financial distress many taxpayers are facing in the current economic environment, the IRS has made adjustments to its procedures for reviewing Offers in Compromise. An Offer in Compromise is an arrangement where the IRS will accept an amount less than the total liability, usually in the form of a lump sum, in full satisfaction of a tax debt. The Service will typically only accept an offer if it represents the greatest amount it can expect to receive from the taxpayer based on the value of his or her net assets, expected income, and monthly expenses. While the offer in compromise program has been available for some time, the methods used to calculate whether an offer should be accepted have been revised in ways that benefit taxpayers. For instance, the IRS has shortened the amount of time into the future it will look when calculating future income, and it has increased the amount of monthly expenses it will allow for certain items.
The Fresh Start Program makes it easier for many taxpayers to qualify for penalty relief. The IRS will now consider a taxpayer’s economic distress in determining whether to forgive penalties. In particular, the Service will abate certain penalties for unemployed individuals resulting from a failure to pay on time. If you can demonstrate how the economic downturn has affected your ability to meet you tax obligations, you may be able to have your penalties abated.
If you owe more money to the IRS than you can afford to pay, please contact our office for a consultation. We can help you address IRS liens, levies, and liabilities in a way that works for your budget.