We like there to be a “bad guy” in our journey to financial freedom. Someone who we can all jump on as the cause for our financial stress. When it comes to taxes, that’s usually the IRS… and they know it.
And I know it too – hence my consistent warnings to my Mount Vernon clients about the intense nature of IRS penalties, audits, and general complexity.
Well, despite popular opinion, the IRS can also be intentionally helpful to taxpayers like you. They do offer some actual care with helping people tackle their tax debt, especially if you’ve landed on some troubled times. This time, it comes in the form of the IRS Fresh Start program.
Yes, this is exactly what it sounds like. The IRS knows that not everyone who has tax debt is a criminal, so it gives taxpayers who are generally compliant a chance to clean their slate (if you fall under that category).
Life throws curveballs – job loss, unexpected medical bills, or any number of unlucky circumstances. In those moments, you have enough to worry about, and it’s why the IRS Fresh Start program is a potential game-changer.
Essentially, the program is an umbrella encompassing several initiatives designed to help you get back on your feet.
- Installment Agreements. Through the Fresh Start program, there are expanded options for setting up payment plans with higher debt thresholds (up to 50K). These will be your key to avoiding any collection action like tax liens or levies, as the IRS cannot take collection action while an installment agreement is pending. And now, under Fresh Start, taxpayers with up to 50K in debt can qualify for streamlined installment plans without having to provide a full financial disclosure.
- Offer in Compromise. This allows for settling tax debt for less than the full amount owed with more flexible criteria. Be mindful, though: The acceptance rate for offers in compromise is quite low (typically 30–40 percent) – often due to the complexity of the application process.
- Tax Lien Relief. Through the program, there are also higher thresholds (bumped up to 10K) for lien filings and easier lien withdrawal after resolution. This means that, generally, fewer taxpayers will have to deal with liens on their credit reports.
- Penalty Abatement. The program may offer relief from certain penalties for taxpayers facing hardship. There are a plethora of penalties that this applies to, as well as a few different types of relief according to your circumstances. These can include First Time Penalty Abatement, Reasonable Cause, or Statutory Exemption.
Now, these options have been available in past years (in fact, the IRS Fresh Start program has existed since 2011), but more recent expansions have widened the scope of what each of them can do. The big draw to the Fresh Start is that the criteria has become more flexible.
However, the IRS Fresh Start program isn’t like the “quick fix” tax ads you might see. It’s the real deal, which means it takes real time.
You’ll need to go back and forth with the IRS, applications will drag on, and interest or some penalties may still be in the picture. And at the end of the day, you’ll still need to pay your dues, either through consistent installment payments that can stretch over several years or by paying a negotiated portion of your debt with an OIC.
With that said, this is not a DIY project… especially because of what’s on the line.
The application process is complex, the negotiations require a deep understanding of tax law, and you absolutely must be transparent and honest with the IRS. The smallest mistake or inconsistency in your application (for an Offer in Compromise, for example) will lead to rejection and a total waste of your time.
The IRS will dig. And any attempt to hide assets or income will backfire spectacularly. Pair yourself with an experienced Westchester County tax advisor who knows what they’re doing and make sure you’re making the most of the relief available to you.
And here’s the beauty of the IRS Fresh Start program: if handled correctly, it’s exactly that – a fresh start. You get to set yourself up to avoid the mistakes that landed you in tax trouble, and I am always happy to help:
calendly.com/l-karam/prospect-schedule
Always here as the good guy,
Lynn Karam