Tax season is never a delightful time, especially if you find yourself drowning in overwhelming tax debt. However, the Internal Revenue Service (IRS) in the United States offers a lifeline in the form of the Fresh Start Program. This program offers taxpayers an opportunity to settle their tax debts and avoid severe penalties. In 2023, the IRS revamped this program to make it more accessible to those who need it most.
But can you really get your IRS debt forgiven? Let’s dive into the details of the Fresh Start Program and how it may benefit you.
Qualifying For The IRS Tax Fresh Start Program
The first step towards getting your tax debt forgiven is understanding whether or not you have qualified for the IRS tax forgiveness program. The criteria for eligibility include being unemployed for at least 30 days during the tax year or experiencing a significant income drop.
Additionally, those who owe $50,000 or less in tax debt and can pay it off within six years usually qualify for the program. If you meet these criteria, you might be a strong candidate for IRS tax forgiveness.
Streamlined Installment Agreements
For taxpayers who owe less than $50,000, the IRS offers Streamlined Installment Agreements under the Fresh Start Program.
This plan allows taxpayers to pay off their tax debt in monthly installments over a period of up to 72 months. It’s a significant relief for those who cannot pay their debt in one lump sum, providing an alternative path toward settling tax obligations.
Offers In Compromise (OIC)
An Offer in Compromise (OIC) is a settlement agreement between a taxpayer and the IRS that allows the taxpayer to settle their tax debt for less than the full amount owed. This option is available to those facing financial hardship, making it difficult to pay off their full tax debt.
However, the IRS evaluates each OIC on a case-by-case basis, considering factors like income, assets, expenses, and the taxpayer’s ability to pay.
Tax Liens And Levies
Before 2023, the IRS could place a tax lien on a taxpayer’s property when they owed $5,000 or more.
With the Fresh Start Program, the threshold has been increased to $10,000. This change means fewer taxpayers will have liens placed on their properties, offering them a fresh start to manage their tax obligations.
Penalty Abatement
The IRS Fresh Start Program also provides penalty abatement or forgiveness for taxpayers who can show a reasonable cause for not paying their taxes on time. This could include reasons like a serious illness, unavoidable absence, or incorrect tax advice.
Remember, penalty abatement is not automatic; taxpayers must apply and provide evidence for their claims.
Innocent Spouse Relief
If you find yourself saddled with tax debt due to a current or former spouse’s actions, the IRS offers Innocent Spouse Relief. This provision absolves the innocent party from paying tax debt if they can prove that they were unaware of their spouse’s tax evasion or inaccurate tax filings.
Partial Payment Installment Agreement
Another option introduced under the IRS Fresh Start Program is the Partial Payment Installment Agreement (PPIA). This plan allows taxpayers to make manageable monthly payments towards their tax debt that are less than the full monthly amount. Once the agreed-upon period is over, the remainder of the tax debt may be forgiven. This option is particularly beneficial for those who can’t meet the minimum payments of a streamlined installment agreement.
However, it’s important to note that your ability to pay and your financial situation will be reevaluated every two years, which may result in changes to your payment plan.
In Conclusion
While the IRS Fresh Start Program 2023 doesn’t promise total tax forgiveness for everyone, it offers various options to manage and potentially reduce tax debt. The program’s changes have made it more accessible to individuals facing tax debts, providing them with much-needed relief and a viable path toward financial stability. If you’re struggling with tax debt, it’s essential to familiarize yourself with these options and consider seeking professional tax advice to guide you through the process. After all, a fresh start could be just around the corner!