Have the ghosts of federal taxes been haunting you lately? If yes, then you will be happy to know that the Internal Revenue Service (IRS) has initiated a fresh start program for the greater good of small businesses and individual taxpayers. The fresh start program was born out of the goodwill of the IRS in 2011. Since then, the program has continued helping taxpayers with their federal taxes.
In recent revisions, the IRS has decided to extend its services to an increased number of taxpayers. IRS has also become more flexible than ever in its offer-in-compromise terms. The program is a godsend for people to resolve their federal tax issues at a speed more significant than ever before.
Guidelines for IRS Fresh Start in Santa Monica, CA
IRS conducts a complete evaluation of a person’s assets before reaching an agreement towards Offer in Compromise. If the IRS believes that the taxpayer is capable of paying a lump sum debt amount or can do so in installments, it will reject your application for Offer in Compromise. To qualify for OIC, the following three conditions must be met.
- If you are self-employed, you must be able to produce proof of at least a 25% drop in your annual income.
- If you are unemployed for 30 days at a stretch or more.
- The debt balance should be below $50,000 a year.
- Only a debt amount summing, not more than $200,000 a year for joint filers and $100,000 a year for individual filers can be earned.
Understanding if you qualify for the IRS Fresh Start Program can be confusing. Seeking advice from a tax professional can be extremely b
neficial for understanding the qualification aspects of the program.
Why did the IRS start this program?
The IRS initiated the IRS Fresh Start Program in 2008 and expanded it in 2012. The program alleviates both financially troubled business owners and individual taxpayers. The program extends support to people who cannot afford to pay their tax debts and struggle to pay their basic bills. By making use of the Fresh Start Program, the financially burdened can affordably pay their debts, without incurring substantial interests and penalties.
The IRS program is specifically designed to support people who owe a tax debt of $50,000 or less. IRS completely waves off the interests and penalties for the tax-paying individuals who are unemployed for 30 days or more.
Does the IRS forgive tax debt?
The IRS runs four programs to provide relief for people by forgiving their tax debts. Three of these programs offer partial waiving of your tax debt amount, namely Wage Earner’s Repayment Plan, Cents on the Dollar, and The life Jacket. There is one program, which under certain conditions offers full relief from tax debts. The program operates under the name Fresh Start.
In this program, the taxpayer has to file bankruptcy under Chapter 7. Chapter 7 allows certain people a chance to get their long-standing debts waived off completely. For a lot of people, this is the quickest and most efficient way to get rid of their tax debts and start a new life.
Will my IRS debt ever go away?
To get your IRS debt partially forgiven, you can opt-in for the federal government debt payment plan, Offer in Compromise (OIC). The OIC plan waves off a significant portion of the tax debts, depending on the taxpayers financial capacity to pay. The financially unstable business owner or the taxpayer can choose a payment plan and pay the partial or reduced debt off in fixed monthly payments.
There exists a clause, 10 Year Statute of Limitations under which the IRS has only 10 years to collect its debt. Failure to do so will force the IRS to wipe it off from its records. The majority of taxpayers are unaware of this limitation, as it is not financially profitable for the IRS. The clauses and rules of Statute of Limitations are difficult to understand, but it can help you get rid of your debt.
How much will the IRS usually settle for?
As easy as it sounds, receiving acceptance for an Offer in Compromise agreement is not that simple. Understanding the offer can be difficult and take time, but a tax professional can guide you through this process too. According to statistics of 2014, the IRS accepted only 40% of the total OIC applications. In other words, 60% of the people were rejected. The sum nearing $6,629 is the average amount to which the IRS settles in an OIC.
However, you need to understand that the IRS does not maintain a fixed percentage of settlement amounts. The amount varies per your ability to convince the IRS that your financial status is bleak, and the IRS might never get its money unless given a IRS fresh start program.