One of the benefits of the 2021 IRS Fresh Start Initiative is that tax payers owing up to $50,000 often become eligible for a streamlined installment agreement, which can be secured with negligible financial information and can have a settlement term of up to 72 months.  For businesses owing as much as $25,000, there is a related program called the in-business trust fund express installment agreement, which offers a settlement term of up to 24 months with minimal financial disclosure. Bear in mind that none of these programs provide any relief from penalties or interest accrued to your tax, though penalty reductions may be accessible through a separate process.

The IRS Fresh Start Initiative is a tax debt relief program organized by the IRS, which can likely result in a “pennies on the dollar” tax settlement.  

You are most likely wondering if this is real.  Is it really simple and you can get started by hiring some kind of tax professional, and your tax liability gets settled for a little fraction of what you or your business owe?  The reality of this is that certain taxpayers and businesses do qualify for a screaming-deal tax settlement as a matter of fact.  However, most do not, so don’t be caught up in the excitement.

This does not imply that many indebted taxpayers cannot gain in some way from the IRS Fresh Start Initiative.  That is because the Fresh Start Initiative covers a host of different ways apart from tax settlements (Offer in Compromise or OIC for short) that makes it easier for taxpayers to resolve their tax liabilities.  

The IRS has a complex and extensive set of rules and policies that guide the way that indebted taxpayers and the IRS resolve tax liabilities.  If you are one who owes $50,000 or less or a business who owes $25,000 or less, and you meet certain criteria, there is a relatively easy process for setting up an installment agreement. Note that some of these same businesses or individuals could be eligible for an OIC, which, although not simple, could lead to substantial savings and may be a far better option than an installment agreement.

If you or your business owes more than those amounts or if you don’t meet basic qualification requirements or if you want settle for less through an OIC, things get very murky, really fast. If you feel that the process of reaching an agreement with the IRS is going to be easy, you’re very mistaken. Apart from the streamlined installment agreement and the in-business trust fund express installment agreement discussed above, you will need to get yourself ready for a lengthy process that will probably involve a lot of financial information, deadlines and demands, severe penalties for failing to meet deadlines and demands, and a important risk that the IRS will require crushing monthly payments that make it complex or impossible for you or your business to make ends meet.

Key Components to the IRS Fresh Start Program | San Diego, CA

For the fortunate few taxpayers to whom the IRS Fresh Start Program benefits, the following summarizes the key parts of the Fresh Start Initiative:

– The IRS boosted the tax debt threshold from $5,000 to $10,000 before it files a Notice of Federal Tax Lien. However, in some circumstances, the IRS may file the Notice of Federal Tax Lien even if you owe less than $10,000

– You may request the IRS to withdraw a Notice of Federal Tax Lien if you:

• Owe less than $25,000 for an individual tax debt
• Agree to pay the IRS every month for a period of 60 months directly from your bank account or wages. This is also known as a direct-debit installment agreement. 
• Pay for three consecutive months under the direct-debit installment agreement.

– For large sum OICs (an offer to settle the tax debt with a “lump sum” payable within 5 months), the IRS will only evaluate one year of future income instead of the normal four years. For short-term periodic OICs (an offer to pay the settlement amount in installments within 6 —24 months), the IRS will only look at two years of future income instead of the normal five years.  This aids in significantly reducing tax resolution amounts for some taxpayers than those that were available previously.