The below two releases regarding the IRS Fresh Start program are straight and unedited from IRS.gov
The original can be viewed here: https://www.irs.gov/newsroom/irs-fresh-start-program-helps-taxpayers-who-owe-the-irs
IRS Fresh Start Program Helps Taxpayers Who Owe the IRS
IRS Tax Tip 2013-57, April 17, 2013
The IRS Fresh Start program makes it easier for taxpayers to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start. Here are three important features of the Fresh Start program:
- Tax Liens. The Fresh Start program increased the amount that taxpayers can owe before the IRS generally will file a Notice of Federal Tax Lien. That amount is now $10,000. However, in some cases, the IRS may still file a lien notice on amounts less than $10,000.When a taxpayer meets certain requirements and pays off their tax liability, the IRS may now withdraw a filed Notice of Federal Tax Lien. Taxpayers must request this in writing using Form 12277, Application for Withdrawal. Some taxpayers may qualify to have their lien notice withdrawn if they are paying their tax liability through a Direct Debit installment agreement. Taxpayers also need to request this in writing by using Form 12277.If a taxpayer defaults on the Direct Debit Installment Agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions.
- Installment Agreements. The Fresh Start program expanded access to streamlined installment agreements. Now, individual taxpayers who owe up to $50,000 can pay through monthly direct debit payments for up to 72 months (six years). While the IRS generally will not need a financial statement, they may need some financial information from the taxpayer. The easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. If you don’t have Web access you may file Form 9465, Installment Agreement, to apply.Taxpayers in need of installment agreements for tax liabilities more than $50,000 or longer than six years still need to provide the IRS with a financial statement. In these cases, the IRS may ask for one of two forms: either Collection Information Statement, Form 433-A or Form 433-F.
- Offers in Compromise. An Offer in Compromise is an agreement that allows taxpayers to settle their tax liability for less than the full amount. Fresh Start expanded and streamlined the OIC program. The IRS now has more flexibility when analyzing a taxpayer’s ability to pay. This makes the offer program available to a larger group of taxpayers. Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer’s income and assets, to make a decision regarding the taxpayer’s ability to pay. Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC.
IRS Announces More Flexible Offer-in-Compromise Terms to Help a Greater Number of Struggling Taxpayers Make a Fresh Start
Update Jan. 6, 2014 — Use Form 656 Booklet, Offer in Compromise, to find the correct form to use.
IR-2012-53, May 21, 2012
WASHINGTON — The Internal Revenue Service today announced another expansion of its “Fresh Start” initiative by offering more flexible terms to its Offer in Compromise (OIC) program that will enable some of the most financially distressed taxpayers to clear up their tax problems and in many cases more quickly than in the past.
“This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years,” said IRS Commissioner Doug Shulman. “It is part of our multiyear effort to help taxpayers who are struggling to make ends meet.”
Today’s announcement focuses on the financial analysis used to determine which taxpayers qualify for an OIC. This announcement also enables some taxpayers to resolve their tax problems in as little as two years compared to four or five years in the past.
In certain circumstances, the changes announced today include:
- Revising the calculation for the taxpayer’s future income.
- Allowing taxpayers to repay their student loans.
- Allowing taxpayers to pay state and local delinquent taxes.
- Expanding the Allowable Living Expense allowance category and amount.
In general, an OIC is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. An OIC is generally not accepted if the IRS believes the liability can be paid in full as a lump sum or a through payment agreement. The IRS looks at the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential. OICs are subject to acceptance on legal requirements.
The IRS recognizes that many taxpayers are still struggling to pay their bills so the agency has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations.
When the IRS calculates a taxpayer’s reasonable collection potential, it will now look at only one year of future income for offers paid in five or fewer months, down from four years, and two years of future income for offers paid in six to 24 months, down from five years. All offers must be fully paid within 24 months of the date the offer is accepted. The Form 656-B, Offer in Compromise Booklet, and Form 656, Offer in Compromise, has been revised to reflect the changes.
Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.
Allowable Living Expenses
The Allowable Living Expense standards are used in cases requiring financial analysis to determine a taxpayer’s ability to pay. The standard allowances provide consistency and fairness in collection determinations by incorporating average expenditures for basic necessities for citizens in similar geographic areas. These standards are used when evaluating installment agreement and offer in compromise requests.
The National Standard miscellaneous allowance has been expanded to include additional items. Taxpayers can use the miscellaneous allowance for expenses such as credit card payments and bank fees and charges.
Guidance has also been clarified to allow payments for loans guaranteed by the federal government for the taxpayer’s post-high school education. In addition, payments for delinquent state and local taxes may be allowed based on percentage basis of tax owed to the state and IRS.
This is another in a series of steps to help struggling taxpayers under the Fresh Start initiative.
In 2008, IRS announced lien relief for taxpayers trying to refinance or sell a home. The IRS added new flexibility for taxpayers facing payment or collection problems in 2009. The IRS made changes to lien policies in 2011 and expanded the threshold for small businesses to resolve tax issues through installment agreements. And, earlier this year, the IRS increased the threshold for a streamlined installment agreement allowing individual taxpayers to set up an installment agreement without providing a significant amount of financial information.