Fresh Start Program: Determining Your Qualifications

In 2011 the IRS launched the Fresh Start Initiative, which included several changes to the criteria to enter into an installment agreement, the dollar threshold for lien filing and the financial analysis utilized to evaluate an Offer In Compromise. These changes were designed to assist taxpayers in repaying their tax debts while getting back on their feet.

The most comprehensive change offered through the Fresh Start Initiative was the expansion of the dollar figure threshold to enter into a streamlined installment agreement. A streamlined installment agreement allowed taxpayers to establish a payment plan to repay their liability through a 72-month installment agreement. The Fresh Start Initiative expanded the debt threshold to qualify for a streamlined installment agreement from $25,000 to $50,000. For example, a taxpayer who owes $50,000 in assessed tax debt could enter into an installment agreement to repay the debt over 72 monthly payments of approximately $695 per month.

The Fresh Start Initiative also increased the threshold at which the IRS would file a lien to secure tax debt from $5000 to $10,000. In addition to expanding the threshold at which liens would be filed, the IRS also launched a program to facilitate the withdrawal of a tax lien. Under the Fresh Start Initiative taxpayers may successfully request a lien withdrawal so long as their total assessed debt is under $25,000, they have an installment agreement established on a direct debit method of payment to repay the debt within 60 months and they have made 3 consecutive successful payments on that agreement.

The Fresh Start Initiative also made significant changes to the financial analysis guidelines for approving an Offer In Compromise. The IRS decreased the future income component of the minimum offer amount from 4 years to only 1 year for lump sum payment offers and from 5 years to 2 years for offers submitted under the periodic payment method. This change not only allowed more taxpayers to qualify for an Offer In Compromise but also significantly reduced the minimum acceptable offer amount, saving taxpayers thousands of dollars in settling their debt.

Another change to the Offer In Compromise Program was the inclusion of expenses such as student loan payments, state tax installment agreement payments and loan payments on assets to increase a taxpayers allowable and reasonable expenses, thereby reducing the future income component of the minimum offer amount. This change also allows more taxpayers to qualify for an Offer In Compromise and reduces the minimum offer amount the IRS will accept in settling tax debts.

If you have a tax debt and suspect that the Fresh Start Initiative may be of assistance to you in alleviating the effects of that debt please consult a tax practitioner who can determine your qualifications for the Fresh Start Initiative and develop a strategy to effectively utilize the new guidelines to your greatest benefit. The tax lawyers at J David Tax Law are experienced at tax relief programs such as the Fresh Start Program.

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