The IRS Fresh Start program aims to relieve debt collections for payments, such as financial penalties and tax liens, often used by Federal Government to punish individuals or small businesses with outstanding tax debts.
However, there are certain requirements a person or business must meet to be eligible for taking advantage of the IRS Fresh Start program.
But what exactly is the program, and are you eligible?
Luis Ceja, Director of Operations at Ideal Tax, joined KPRC 2+ Now to highlight how the IRS Fresh Start program works, the eligibility criteria and why people should avoid using tax debt relief companies.
How does the IRS Program work?
The Fresh Start Initiative is not a singular tax relief program, it is a set of resolution options that allow individuals and small businesses to pay their debts in manageable ways.
There are four forms of options within the program for tax debt relief. These include the offer in compromise (OIC), installment agreements, currently non-collectible, and penalty abatement.
Am I eligible for the IRS Fresh Start Program?
There are certain qualifications a person needs to have to participate in the IRS Fresh Start program.
Applicants must meet the following criteria:
- For sole proprietors – Income has dropped by 25%.
- Annual income is below $100,000. (single)
- You have an annual income of less than $200,000 (married). You owe less than $50,000 in tax debt.
- Taxpayers who have a clean history with zero missed payments with the IRS.
- Collection Information Statements such as Form 433 is a financial documentation with your income and expenses. The IRS uses this to determine your eligibility.
- Be able to pay the tax liability within 60 months or before collection statutes expire.
A spokesperson for Tax Relief Professionals at Ideal Tax says,
“The IRS has forgiven millions of Americans, giving them financial freedom from tax debt.
“Whilst certain criteria need to be met to qualify, the Initiative can be extremely beneficial in helping to prevent debt worsening.
“If an individual or business with substantial debt does not participate, the consequences can be severe, resulting in various penalties and interest fees. Additionally, taxpayers could be subjected to wage garnishments and liens.
“One thing that is important to add is to qualify for the Fresh Start initiative, you must be current on your tax filings with the correct withholding amount.
“Getting assistance from a licensed tax professional is recommended for both getting your filings in line and negotiating with the IRS.
“With several different programs on offer, it is imperative to pick the program that best suits your financial situation.”
Why should I avoid using tax debt relief companies?
The biggest risk of utilizing a tax debt relief company is not successfully resolving your IRS debt.
A release stated:
“There are many scams out there that take advantage of unknowing people who are stressed about their tax issues, such as their credit card debt, trouble with mortgages, student loans, or filing for bankruptcy.
“A red flag to look out for when you research or Google which sites you should use to help is if they lack positive reviews. Additionally, if a company makes drastic claims about how much cash it can save you and fails to mention a disclaimer about the eligibility requirements for IRS tax relief, you should question the agency’s legitimacy.”
Instead of providing tax help, the wrong tax company can add insult to injury and make your tax problems worse, so it is important that clients know their rights and conduct thorough research when seeking professional help with the navigation of tax relief.
The cost of how much a tax relief company charges is also an important factor to consider.
Some tax debt relief companies charge a percentage of the total tax debt, such as 10% to 20%, whereas others charge a flat fee, such as $1,000, so it is beneficial to compare this statistic when choosing a tax relief company.