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Fresh Start For Taxpayers Who Owe Back Taxes

by Matthew Person on March 9, 2016

Do you owe back taxes to the IRS? If so, there is a program called Fresh Start that can help you get caught up and get out of trouble with the IRS. The most important first step is to file NOW and let us help you get the process started. Every year you avoid filing, the penalties and interest grow larger along with your stress and worry.

There are a number of additional issues that result from not filing your tax returns timely. If you are self-employed, you are losing credits towards your Social Security benefits for every year you do not file. You will not be able to obtain loans of any sort without a current tax return. If you are due a refund for withholding or estimated taxes, you must file your return to claim it within 3 years of the return due date. The same rule applies to a right to claim tax credits such as the Earned Income Credit.

If you do not file a return, the IRS may file a substitute return for you. It is likely you will not receive all the credits and deductions that you are entitled to claim. If you do not contest their proposed return within 90 days of receipt of the Notice of Deficiency, you will owe the amount as shown on their filing for you. Collections will begin and may lead to a wage levy, bank levy or tax lien.

The 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 debt, the IRS may now withdraw a filed Notice of Federal Tax Lien. Taxpayers must request this in writing. Some taxpayers may qualify to have their lien notice withdrawn if they are paying their tax debt through a Direct Debit installment agreement.
  • 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.
  • Offers in Compromise. An Offer in Compromise is an agreement that allows taxpayers to settle their tax debt 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 in Compromise if it represents the most they think they can 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. You will want to have carefully prepared financial statements to bolster your offer to the IRS. We can help you with the entire process, from filing your tax returns to preparing your financial returns and negotiating with the IRS. The longer you delay, the more stressful your situation becomes. Take that first step TODAY and contact us for help!

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