September 15, 2015

The IRS Fresh Start

In 2008, the Internal Revenue Service (IRS) began a program called the Fresh Start, which aimed to assist those with back taxes. This program provides taxpayers with back taxes and other Federal tax debts with a range of alternatives.  It also increases the original liability coverage from $25,000 to $50,000 with monthly payments for 72 months instead of the original 60. This provides taxpayers with lower monthly payments and covers up to $50,000 in back taxes, giving them a chance to pay off their debt without having their financial information scrutinized or having a Federal tax lien filed against them.

In addition to individuals, the program offers help to businesses owing under $25,000 by providing a payment plan over 24 months to avoid a lien. It is important to realize that these are helpful implementations under the project; they are not guaranteed as accepted alternatives and the IRS can seek financial information even if they agree to the alterative repayment.

This program also benefits offers in compromise, which are offers to settle outstanding liability with a reduced amount. Usually this comes into play when the amount owed is much higher than $50,000 or if there is an inability to pay the full amount throughout the 72 months. This program devices a new calculation to determine whether the taxpayer can afford the total owed or an offer in compromise. There are two components to this calculation, looking first at the net equity of the taxpayer’s assets and then their future income potential. The future income potential is a calculation of the taxpayer’s excess income on a monthly basis multiplied by a determined amount of months, usually 12. Before the fresh start program, this determined amount of months was 48.

The program also provides taxpayers credit for certain expenses, such as student loan payments. The program is a great asset to look into if you have a problem with paying back taxes. For any issues you may have with the IRS and your taxes, contacting an experienced attorney can be helpful. Having financial problems with paying back taxes can be difficult and confusing. Contact the Law Office of Michael Alan Siddons for a free consultation at (610) 255-7500 to talk about your options.