IRS Fresh Start Initiative & Program – Get a Fresh Start with the Internal Revenue Service NOW!

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Yes, the IRS is actually doing something very positive to help taxpayers that are experiencing tax problems.

I am a Former IRS Agent and Teaching Instructor with the Internal Revenue Service and it is still hard to believe.

There are several new initiatives the IRS now has the table that is changing the ways people are resolving back tax issues.

I have been working IRS cases for over 38 years and to date this is one of the biggest policy shifts I have ever seen. The flood gates are wide open for Offers in Compromise.
 IRS wants to now settle cases. Hard to believe but it is true.

IRS has reduced the age old firm guidelines to reasonable standards so that thousands of taxpayers/clients may now qualify to get their cases settled for cheap and their tax liens released.

In a nutshell, IRS has reduced the asset requirements and completely modified monthly standards of income and expense elements. 
As a result, clients that could never qualify for an OIC or tax debt settlements are now excellent  settlement candidates.

This IRS announcement focuses on the financial analysis used to determine which taxpayers qualify for an Offer in Compromise.

It is possible for some taxpayers to resolve their tax problems and back taxes in as little as two years compared to four or five years in the past.

The changes announced  include:

1. Revising the calculation for the taxpayer’s future income. This is a massive change.

2. Allowing taxpayers to repay their student loans. This could cut a settlement payment down some $30,000.

3. It allows taxpayers to pay state and local delinquent back taxes,

4. It also allow for the expanding the Allowable Living Expense allowance category and amount.

 The IRS finally recognizes that  taxpayers are still struggling to pay their bills and debt so the IRS has been working to put in place common-sense changes to the OIC program to more closely reflect real-world situations.

When the IRS usually determines and calculates a taxpayer’s reasonable collection potential, the IRS  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.This is the major change that will save the taxpayers thousands and thousands of dollars.

Key Point to Remember – All offers in compromise ( OIC ) must be fully paid within 24 months of the date the offer is accepted.

Other changes to the OIC 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.

Notable Area – 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:

1. credit card payments and

2. 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.

Changes made to the Federal Tax Lien Policy

The IRS made changes to federal tax  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.

More changes, Penalty Relief.

The Internal Revenue Service has expanded its “Fresh Start” initiative to help struggling taxpayers who owe taxes. The following four tips explain the expanded relief for taxpayers.

Penalty relief Part of the initiative relieves some unemployed taxpayers from failure-to-pay penalties. Penalties are one of the biggest factors a financially distressed taxpayer faces on a tax bill.

The Fresh Start Penalty Relief Initiative gives eligible taxpayers a six-month extension to fully pay 2011 taxes. Interest still applies on the 2011 taxes from April 17, 2012 until the tax is paid, but you won’t face failure-to-pay penalties if you pay your tax, interest and any other penalties in full by Oct. 15, 2012.

The penalty relief is available to two categories of taxpayers:

1. Wage earners who have been unemployed at least 30 consecutive days
during 2011 or in 2012 up to this year’s April 17 tax deadline.
2. Self-employed individuals who experienced a 25 percent or greater
reduction in business income in 2011 due to the economy.

The IRS could have expanded it policies on late filers but chose to ignore the largest penalty the IRS charges. I would have loved to see IRS loosen their belts here.

Qualifications for Penalty Relief

To qualify for this penalty relief, your adjusted gross income must not exceed $200,000 if married filing jointly or $100,000 if your filing status is single, married filing separately, head of household, or qualifying widower. Your 2011 balance due can not exceed $50,000.

Taxpayers who qualify need to complete a new Form 1127A to request the 2011 penalty relief. The new form is available on www.irs.gov or by calling 1-800-829-3676 (TAX FORM).

Installment agreements,part payment plans or installment agreements

An installment agreement is a payment option for those who cannot pay their entire tax bill by the due date. The Fresh Start provisions give more taxpayers the ability to use streamlined installment agreements to catch up on back taxes and also more time to pay.

The new threshold for requesting an installment agreement has been raised from $25,000 to $50,000. This is very huge.

This option requires limited financial information, meaning far less burden to the taxpayer. The maximum term for streamlined installment agreements has been raised to six years from the current five-year maximum.

If your debt is more than $50,000, you’ll still need to supply the IRS with a Collection Information Statement (Form 433-A or Form 433-F).

You  can  also pay your balance down to $50,000 or less to qualify for this payment option.

With an installment agreement, you’ll pay less in penalties, but interest continues to accrue on the outstanding balance. In order to qualify for the new expanded streamlined installment agreement, you must agree to monthly direct debit payments.

Call us today and we can answer all your questions. If you need help with any back tax issues , tax debt settlements, or unfiled tax returns we are the firm to turn to for tax relief.

Our team of Former IRS Agents, Tax Attorneys and CPA’s are some of the best in the business.

IRS Fresh Start Initiative & Program – Get a Fresh Start with the Internal Revenue Service NOW!