In this article, you can learn about:
- What the Fresh Start Program is.
- What is the IRS Installment Agreement?
- Can interest and penalties be reduced?
- And more…
If you are in collections with the IRS, they can collect by the following:
- Levy your account
- File tax liens against you
- And more…
Tax liens are bad because if you own a home then that tax lien will attach to that home. When you try to refinance your house or sell your house, that lien is going to have to be satisfied before you can enter that transaction. Taxes liens can also withhold your passport renewal, and you could lose your license (depending on the type of license). These are a few of the consequences you may have to deal with.
It’s not good to be in collections with the IRS. If you find yourself in collections, the best thing to do would be to try to get out of collections quickly by negotiating either a settlement or installment agreement.
What Is The IRS Fresh Start Program And Who Can Qualify For This?
The IRS Fresh Start Program is an offer in the compromise program. It’s meant for people who used to own a business that shut down because of COVID. This caused your tax debt to get out of control and now you are trying to get your act together but have very few assets.
If you have a job but your income is not enough to pay the full amount of your debt, we can put a package together to present to the IRS that says:
- This is how much money you have
- This is what assets you have
- This is what extra income you have at the end of the month
- Request the take less.
Sometimes the IRS takes a lot less depending on what your financial situation is. We have seen some people reduce their tax debt up to 5% of what they originally owed. However, once we put in the application, it can take a long time for them to get back to us.
The IRS tends to be very understaffed in the resolution department. The last application our firm sent in took 6 months to hear a response. They look at everything we provided and they make us a counter offer stating they are only going to allow a certain amount to be spent on:
- Car Payments
- Your Mortgage
- And more…
We negotiate back and forth, and, finally, the fresh start is that the taxpayer can resolve the debt for a fraction of what was originally owed and be done. Now you can go back to being a normal taxpayer without getting tax notices every week in the mail. It’s a great program but it’s not easy to qualify for.
Can There Be Forgiveness Of Tax Debt?
There is no real forgiveness of tax debt, although there are cases where it’s against public policy for the IRS to enforce the debt. For example: if someone was diagnosed with terminally ill cancer and they only had 2 years to live and owed money to the IRS. This is a situation where the taxpayer is never going to be able to pay off the debt. Therefore, their hardship can put them in a category where the IRS will just stop going after them.
What Is The IRS Installment Agreement And Who Qualifies?
Most people will qualify for an installment agreement. If you didn’t withhold enough from your paycheck and you get a nasty surprise when you do your taxes and you are going to need to pay $5,000. However, you don’t have $5,000 in your account. So, you tell the IRS you’re going to pay you $500 a month over the next 10 months. It’s that simple to do an installment plan in some cases.
The more creative instances are where the taxpayer owes a lot of back taxes. For instance, you owe $200,000, and based on your income, it’s going to be hard to pay that whole $200,000 over the life of the tax. The tax debt expires after 10 years so you only have a certain amount of time to get it paid. After a certain amount of time, the IRS can’t come after you anymore.
If you have enough disposable income, you can pay the debt off within that statute of limitations.
The trickier ones where you might need help from our firm is when you owe $100,000. You don’t qualify for the easy one and you don’t quite make enough to pay it off in the given amount of time. We are going to try to get them to agree to take less by giving them as much disposable income as you can prove that you have.
If we show them that your disposable income is $800 a month after all your expenses, and they agree, then they’ll just put you on an $800 a month plan for a certain number of years. It might not satisfy the full liability, but they agree to accept it. It’s like an offer in compromise but we call it a partial pay installment agreement. To qualify for that they make us run through a bunch of hoops to prove what the expenses are, and what the income is, but it can be nice and it’s easier than just getting an offer in compromise.
Will The IRS Work With Me To Reduce Interest And Penalties On My Tax Debt?
The IRS will work with you on reducing the interest and penalties attached to your tax debt. However, it is hard, and you are basically talking to a collection agency. If you are comfortable and you can handle yourself on the phone well, go for it. If you don’t owe a lot of money, it’s perfectly reasonable to call yourself.
We get involved when the debt is large, or the taxpayer just doesn’t want to talk to the IRS. We have a special phone line we can call as professionals and we know more of their procedures. This allows us to figure out what the chance is of reducing or eliminating interest, so we ask them the right questions when we get them on the phone. We can do it faster, but if your debt isn’t really big or you only owe $10,000, then you could probably do that yourself.
For more information on Ending Up In Collections With The IRS, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (225) 465-1090 today.