Fresh Start for Back Taxes

The Fresh Start program was launched in 2008 to help individuals and businesses pay back taxes, as well as to reduce the number of tax liens issued.

In 2008, the IRS also announced tax lien relief for people trying to refinance or sell a home, and in 2009 the agency added new flexibility for taxpayers facing payment or collection problems. In 2011, the IRS made additional changes to tax lien policies and expanded the threshold for small businesses resolving tax issues through installment agreements.

In March 2012, the IRS announced an increase in the threshold for using an installment agreement (from $25,000 to $50,000) without providing a significant amount of financial information. Taxpayers who owe up to $50,000 in back taxes can now enter into a streamlined installment agreement with the IRS to stretch their payments out over a series of months or years. The maximum length for streamlined installment agreements was raised to seventy-two months (from the previous limit of sixty months).

It’s possible that entering into an IRS Fresh Start Program Installment Agreement is right for you, but just make sure that you’ve gotten all the information you need.

 

Streamlined Installment Agreements

The Fresh Start provisions also mean that more taxpayers will have the ability to use streamlined installment agreements to catch up on back taxes.

Under the Fresh Start initiative, the maximum dollar criteria for streamlined installment agreements has been raised from $25,000 to $50,000 and the maximum term has been raised from 60 months to 72 months.

These installment agreements generally do not require a financial statement, but a limited amount of financial information may be required in the application process.

The Streamlined Installment Agreement criteria is divided into two categories, balance due of $25,000 or less, and balance due $25,001 to $50,000.

The criteria to qualify for streamlined installment agreements with a balance due of $25,00 or less are:

You owe $25,000 or less, at the time the agreement is established. If you owe more than $25,000, you may pay down the liability before entering into the agreement in order to qualify. The debt must be full paid within 72-months or prior to the Collection Statute Expiration Date, whichever is earlier. You must be compliant with all filing and payment requirements. Individuals who owe any type of tax (Form 1040, Trust Fund Recovery Penalty, etc.). Defunct businesses, including any type of entity and any type tax (Form 940, 941, 943, etc.). Operating businesses are limited to income tax liabilities only (Form 1120).

The criteria to qualify for streamlined installment agreements with a balance due of $25,001 to $50,000 are:

You owe $25,001 to $50,000, at the time the agreement is established. If you owe more than $50,000, you may pay down the liability before entering into the agreement in order to qualify. The debt must be full paid within 72-months or prior to the Collection Statute Expiration Date, whichever is earlier. You must be compliant with all filing and payment requirements. Individuals who owe any type of tax (Form 1040, Trust Fund Recovery Penalty, etc.). Businesses are limited to defunct sole proprietors who owe any type of tax (Form 940, 941, 943, etc.). You must enroll in a Direct Debit Installment Agreement. A limited amount of financial information may be required during the application process.

Taxpayers seeking installment agreements exceeding $50,000 will still need to supply the IRS with a Collection Information Statement (Form 433-A (PDF) or Form 433-F (PDF)).

Contact Plano Tax Prep today to free yourself from the burden of back taxes!

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