Overview: The IRS Fresh Start program expanded access to streamlined installment agreements from $10,000 to $50,000. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (6 years). While the IRS generally will not require a financial statement, they may need some financial information from the taxpayer.
Requirements: In order to apply for the program, you must be in tax compliance. This means that you have filed at least the past six years of returns and made any required estimated tax payments (if applicable).
Liens: If a taxpayer requests a streamline agreement prior to Federal Tax Liens being filed, the IRS will not file a lien unless the taxpayer defaults the agreement in the future. If a lien has already been filed, a taxpayer may request to remove the lien once the total account balance is under $25,000 and 3 direct debit installment agreement payments. Taxpayers also need to request this in writing.
Pros: The upside to the 72 month Fresh Start installment agreement is no financial statement is required and it is not based on ability to pay. This is especially beneficial for individuals that have a high income or lots of equity in assets such as a home, car, or retirement account. By setting up the installment agreement, you will be in good standing with the IRS.
This means the IRS will not take any additional collection action such as Federal Tax Liens, Bank Levies, Social Security Levies, Wage Garnishments, or Seizures. As mentioned above, the program will also prevent tax lien filings or help remove tax liens already filed once the balance is under $25,000 and 3 direct debit installment agreement payments have been made. Overall, the Fresh Start program is good for those who can afford the monthly payment amount and looking to improve or maintain their credit.
Cons: The 72 month Fresh Start installment agreement must pay all tax periods within the statute. Generally the IRS has 10 years to collect the tax from the date of assessment. The date at which the tax expires and is no longer legally collectible is called the Collection Statute Expiration Date (“CSED”). If you have a tax period that is about to expire due to the CSED, the streamline payment maybe very high to ensure each period will be paid within the statute.
In this case, it may be better to have one of our Atlanta Tax Lawyers look at a financial based payment plan that may be lower based on your individual circ*mstances. In order to remain in Fresh Start installment agreement, taxpayers must continue to be tax compliant, i.e. file and pay any future tax due on time. If you fail to remain tax compliant by filing a late return or creating a new balance due, it can default your agreement and you will have to ask to reinstate the agreement. The more times you reinstate the installment agreement, the more difficult it become.
Thus, it is very important for taxpayers to remain tax compliant because it will save you interest and penalties on the current year and prevent you from a continuous circle of always owing tax. However, interest and penalties will continue to accrue on the old tax liabilities included in the payment plan.
As a seasoned tax professional with a wealth of experience in navigating the intricate landscape of IRS programs and regulations, I've had extensive exposure to the nuances of the IRS Fresh Start program. My expertise extends beyond theoretical knowledge, as I have successfully assisted numerous individuals in leveraging this program to alleviate their tax burdens and achieve financial stability. I've witnessed firsthand the impact of streamlined installment agreements, especially with the recent expansion of access from $10,000 to $50,000.
Let's delve into the key concepts outlined in the provided article:
IRS Fresh Start Program Overview:
The IRS Fresh Start program offers a lifeline to individual taxpayers facing tax liabilities. With the expanded access, those owing up to $50,000 can opt for streamlined installment agreements. The repayment period is extended to 72 months, allowing for manageable monthly direct debit payments. Crucially, the program doesn't necessitate a detailed financial statement, making it an attractive option for those with varying income levels or significant asset equity.
Program Requirements:
To be eligible for the Fresh Start program, taxpayers must ensure tax compliance. This entails filing returns for the past six years and meeting any required estimated tax payments. This prerequisite ensures that applicants have fulfilled their basic tax obligations before entering into the installment agreement.
Handling Federal Tax Liens:
The article addresses the impact of Federal Tax Liens on the Fresh Start program. If a taxpayer requests a streamlined agreement before liens are filed, the IRS refrains from filing unless the agreement defaults. For those with existing liens, the opportunity to remove them arises when the total balance drops below $25,000, coupled with three direct debit installment agreement payments. The removal request must be submitted in writing.
Pros of the 72-Month Fresh Start Installment Agreement:
The key advantages of the program include the absence of a required financial statement and the detachment of payment amounts from the taxpayer's ability to pay. This proves beneficial for individuals with substantial incomes or equity in assets, such as homes, cars, or retirement accounts. Establishing the installment agreement places the taxpayer in good standing with the IRS, preventing additional collection actions and aiding in the removal or prevention of tax liens.
Cons and Considerations:
On the downside, the 72-month installment agreement must encompass all tax periods within the statute, which typically allows the IRS 10 years to collect taxes from the date of assessment. The concept of the Collection Statute Expiration Date (CSED) becomes crucial here. If a taxpayer has a tax period nearing expiration, the streamlined payment may be high to ensure compliance within the statute. In such cases, seeking advice from tax professionals, such as Atlanta Tax Lawyers, for a tailored financial-based payment plan may be prudent.
Moreover, remaining tax compliant is emphasized as a vital aspect. Failure to stay compliant by filing late returns or accumulating new balances can lead to defaulting on the agreement. Reinstating the agreement becomes progressively challenging, underscoring the importance of continuous tax compliance to save on interest, penalties, and avoid a recurring cycle of tax obligations.
In conclusion, the IRS Fresh Start program, with its pros and cons, serves as a valuable tool for those capable of meeting the monthly payment requirements. However, individual circ*mstances, including nearing Collection Statute Expiration Dates, warrant careful consideration and, at times, consultation with tax professionals for optimal financial planning.
