Get a Fresh Start for the New Year: All about the IRS Fresh Start Program

Get a Fresh Start for the New Year: All about the IRS Fresh Start Program

• Dec 29, 2021

For many, the New Year is a time to start anew—to let go of bad habits, create new ones, and try to make your life just a little bit better. That’s tough to do if you feel tied down by overdue taxes and a large debt to the IRS. Luckily, there is a way to find relief, and the IRS Fresh Start Program makes finding that relief a little bit easier. Here’s what you need to know about this program, and how to determine if it’s right for you.

Changes on Tax Liens

If your tax burden is large enough, the IRS may file a Notice of Federal Tax Lien against your property. This places additional stress on you, with the fear that you will lose your property if you can’t pay your tax debt. But the Fresh Start Initiative changed several elements of the IRS’s tax lien policy, which reduces how often these liens occur as well as making it easier to have these liens withdrawn.

Previously, taxpayers who owed $5,000 or more in overdue taxes could have a lien placed on their property. Under the Fresh Start Initiative, however, that amount increased to $10,000, helping to protect more taxpayers’ properties from liens. It is important to note that, under certain circumstances, the IRS may still elect to place a lien on property for debts under $10,000; however, these are not very common.

Changes to withdrawing tax liens also make it easier for taxpayers to get back on their feet and out from under a lien. A lien on your property can be withdrawn in one of three ways:

1. If the lien is paid off and the taxpayer remains in filing compliance on their returns for three years, they can request a lien withdrawal.
2. The taxpayer can set up a long-term monthly payment plan on a debt of $25,000 or less, with direct debit payments to the IRS. After three consecutive direct debit payments, they can then request a lien withdrawal.
3. If the taxpayer is already on an installment plan, they can convert the plan to direct debit payments. Again, after three successful direct debit payments, they can request a withdrawal.

Previously, lien withdrawal was only available after debts were fully paid. The ability to get out from under a tax lien while still repaying your debt can offer a much-needed sigh of relief to those with tax debts.

Changes to Installment Agreements

Speaking of installment plans (also known as long-term monthly payment plans), the debt thresholds for these programs increased under the Fresh Start Program as well. Previously, individuals had to owe $25,000 or less to qualify for a streamlined installment agreement; that threshold increased to $50,000. The tax debt threshold for small businesses also increased from $10,000 to $25,000, and if a business owes more than $25,000 in taxes, they have the option of paying down any amount over that threshold, then applying for an installment plan for the remaining amount.

Changes to Offers in Compromise

An offer in compromise (also known as an OIC) is notoriously difficult to receive. While the Fresh Start Program doesn’t exactly make an OIC easy to get, it did alter the calculations the IRS uses to determine who qualifies, making it a possible tax abatement solution for more people. Changes to these calculations include:

• Revising the calculation for your future income
• Allowing you to pay outstanding student loans
• Allowing you to pay state and delinquent taxes
• Expanding the categories for allowable living expenses
• Increasing the amount for allowable living expenses

Essentially, these changes make it more likely that the IRS will deem you unable to pay the full amount of your tax debt and, therefore, more likely to accept your offer in compromise.

Changes to Currently Not Collectible Status

Receiving a Currently Not Collectible (CNC) status on your account with the IRS won’t help to settle your tax debt; however, it can halt enforcement actions and give you a reprieve from wage garnishments, liens, levies, and pesky collections calls. The Fresh Start Initiative eased documentation requirements and made the process easier for those who owe $10,000 or less to receive a CNC on their tax debt. This can give you a bit of breathing room as you work to settle what you owe.

Can It Work for You?

If you owe taxes to the IRS, the Fresh Start Initiative can make it easier for you to settle that debt. However, the only way to know if it can truly work for you is to schedule a consultation with one of our tax abatement experts. We’ll consult with you to determine if this program can work in your favor, and help you get the fresh start you deserve in 2022.