IRS Fresh Start Initiative Expanded to Aid Struggling Taxpayers

The Fresh Start Initiative helps taxpayers in three ways: through penalty relief, installment agreements, and through offers in compromise.

In 2012, the IRS announced that it was expanding its Fresh Start Initiative, offering further relief to taxpayers who owe taxes. The initiative helps taxpayers in three ways: through penalty relief, through installment agreements, and through offers in compromise.

The penalty relief portion of the initiative has been offered to individuals who have been unemployed for more than thirty consecutive days during the year or who are self-employed and have experienced a 25 percent or greater reduction in income due to the economy. This component of the Fresh Start Initiative offers a six-month extension on the payment of the tax bill for those who qualify.

With redesigned installment agreements, taxpayers now avoid having to request an installment agreement for taxes owed until the tax bill reaches the threshold of $50,000. Previously, the threshold was $25,000, at which time the IRS would begin a financial analysis of a person's finances as well as filing a Notice of Federal Tax Liens. Those reaching the $50,000 threshold can now take six years to pay the money off, rather than the previous five years that was required before the initiative's expansion.

The Offer in Compromise applies to those individuals who don't have either the money to pay off the debt that they owe to the IRS or enough assets that could be seized to satisfy the debt. In order for the Offer in Compromise to be successful, both the taxpayer and the IRS must agree that the taxpayer does not have the money or assets to pay off the debt. The taxpayer offers an amount that he/she is able to pay, and the IRS agrees to this amount, even if it is far below what is owed. Once the agreed on amount is paid, the taxpayer's bill is considered "paid in full."

While the Offer in Compromise is a wonderful tax relief solution for many people, the chances of having an offer rejected are quite high. Often, the IRS believes that the full amount can be paid as a lump sum or through a payment agreement. Errors or omissions on Offers in Compromise submissions are also a frequent reason for denial. Because the process of obtaining an agreement from the IRS for an Offer in Compromise is so difficult, it is highly recommended that those seeking this tax relief solution consult a professional with experience in this process.

The expert tax accountants and attorneys at Optima Tax Relief have the experience with Offers in Compromise that you need. They will take a look at your situation to determine if the tax debt is legally compromised through doubt of liability or doubt of collectability. If there is no doubt regarding the debt, then Optima Tax Relief will help you to demonstrate the economic hardship that you will incur if forced to pay the full amount.

For more information on the tax relief options that are available to you, contact us today.