Can the IRS Fresh Start Program Help with My Business Back Taxes?

If you’re an individual or have a business struggling to pay back taxes, the IRS has a program called Fresh Start that could help.

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Are you struggling with tax debt and feeling overwhelmed by the burden? Don’t worry, there’s hope! The IRS Fresh Start Tax Program is here to help taxpayers like you manage and reduce your tax debt through simplified payment procedures, debt settlement, payment plans, penalty waivers, and delay of tax collections. Read on to uncover the benefits and options available to you through this program.

What is the IRS Fresh Start Tax Program?

The IRS Fresh Start Tax Program is a set of initiatives designed to help taxpayers manage and reduce their tax debt. It offers a variety of benefits, such as simplified payment procedures, debt settlement, payment plans, penalty waivers, and delay of tax collections. By meeting specific criteria and submitting an application through the IRS website or a tax professional, you can take advantage of this program to alleviate your financial burden.

The Fresh Start Tax Program offers several repayment options to help you clear your tax debts, including installment agreements, offer in compromise, currently not collectible status, and penalty abatement.

Simplified Payment Procedures

Penalty abatement can provide you with the opportunity to reduce or even eliminate any penalties you may have due to reasonable cause. The Fresh Start Tax Program also offers currently non-collectible status, which stops collection activities and provides you with the chance to manage your tax debt more effectively. By working with a tax relief company, you can maximize the benefits of currently non-collectible status and create a plan for when you transition away from non-collectible status.

You can qualify for a penalty abatement if you meet the IRS criteria. Requesting it is possible at each collection level, including a local office. In addition, you can reach out to IRS personnel at a local office to discuss your options and take advantage of this program. 

Expansion and Updates

The 2012 expansion of the Fresh Start Initiative Program increased the opportunity for more taxpayers to apply and qualify for tax relief. This was especially important during the COVID-19 pandemic, which created financial hardship for millions of Americans and drove a significant increase in accepted offers for Fresh Start tax relief in 2020. The IRS has also made it easier to calculate your future income when considering you for an offer in compromise, allowing more taxpayers to benefit from the Fresh Start Program.

One of the most notable updates of the Fresh Start Initiative Program is the doubling of the threshold required for the IRS to file a notice of a federal tax lien. This means that first-time debtors who owe less than $25,000 can have their federal tax lien removed, providing even more relief for struggling taxpayers.

Eligibility Criteria for the IRS Fresh Start Tax Program

To qualify for the Fresh Start Tax Program, you must meet specific eligibility criteria. These requirements include experiencing a 25% drop in income, having an annual income below $100,000 (single) or $200,000 (married), and owing less than $50,000 in tax debt.

If you meet these criteria, you could be on your way to relief from your tax burden.

Income Thresholds

The income thresholds for the Fresh Start Tax Program are designed to ensure that those who need help the most can access it. To take advantage of the program, your annual income must be under $100,000 if you’re single and under $200,000 if you’re married. These income requirements provide a benchmark to determine if you qualify for the program.

It’s important to understand that income thresholds aren’t set in stone, as each taxpayer’s financial situation is unique. The IRS considers your individual circumstances when determining your eligibility for the Fresh Start Tax Program. So, even if your income is close to the threshold, it’s worth exploring your options to see if you qualify.

Tax Debt Limitations

In addition to the income thresholds, there are tax debt limitations that you must meet to qualify for the Fresh Start Tax Program. You can have up to $50,000 in tax debt and still be eligible for the program.

By ensuring that your tax debt falls below this threshold, you increase your chances of successfully applying for the program and receiving the relief you need.

Exploring Payment Options under the Fresh Start Tax Program

Once you meet the eligibility criteria, the Fresh Start Tax Program offers a variety of payment options to help you manage and reduce your tax debt. These options include installment agreements, offer in compromise, currently not collectible status, and penalty abatement.

Understanding these payment options is crucial in determining which one is the best fit for your financial situation and will provide the most tax relief.

Installment Agreements

Installment agreements provide taxpayers with the flexibility to pay their tax debt in manageable monthly payments over a period. The amount of the monthly payment and the length of the repayment period will be based on your financial situation, allowing for a more personalized payment plan.

However, be aware of the potential drawbacks of an installment plan. The Fresh Start Program from the IRS applies interest to your total debt. This means that you may end up paying more than you originally owed, even if the amount you have to pay each month is different.

To reduce your monthly payments under an installment agreement, you can consider enlisting the help of a professional tax relief company to represent you and advocate for your interests.

Offer in Compromise

An offer in compromise (OIC) is an opportunity for taxpayers to reduce their tax debt. Depending on your financial situation, you could pay a lower amount than what you originally owed the IRS. This can be a lifesaver for those facing significant tax debt and financial hardship.

To maximize your chances of success with an OIC, consider hiring a tax professional to help you prepare and submit your offer to the IRS. They can guide you through the application process, provide expert advice, and help ensure that you make a reasonable offer that reflects your current financial situation.

Currently Not Collectible Status

If you’re facing financial hardship and can’t afford to pay your taxes, currently not collectible status may help. This status lets you temporarily suspend your tax debt payments until your financial situation improves. The IRS will stop collection activities, release existing levies on assets, and provide you with the breathing room you need to get back on your feet.

To take advantage of currently not collectible status, you’ll need to provide evidence that paying your living expenses along with your back taxes will cause financial hardship. By demonstrating your financial difficulties, you can use this option to delay payments until you’re able to afford them and get back on track with your tax debt.

Penalty Abatement

Penalty abatement is another form of relief offered by the Fresh Start Tax Program, allowing you to reduce or eliminate penalties due to reasonable cause. By providing evidence of reasonable cause for your existing tax bill, you can take advantage of this opportunity to lessen the burden of penalties and interest.

You have three ways to ask for penalty abatement. You can visit a federal IRS campus, use the automated collection system, or contact personnel at local IRS offices. 

Applying for the Fresh Start Tax Program

To apply for the Fresh Start Tax Program, you must gather the necessary supporting documentation to demonstrate your financial situation and write a letter to your regional IRS office, including a copy of IRS Form 843 and any supporting documentation.

By taking these steps and ensuring that your tax filing is up to date, you can start the application process and work toward resolving your tax debt.

Writing a Letter to the IRS

When writing your letter to the IRS for the Fresh Start Tax Program, it’s essential to include a statement expressing your eagerness to request relief under the program. Your letter should also include an explanation of your financial situation, detailing your income, expenses, assets, and liabilities to ensure the best understanding of your financial situation.

By providing a thorough and well-organized letter, you increase your chances of successfully applying for the program and receiving the tax relief you need.

Gathering Supporting Documents

As you prepare to apply for the Fresh Start Tax Program, it’s crucial to gather complete information about your income, expenses, assets, and liabilities. This includes bank statements, pay stubs, and other documents that illustrate your financial situation.

Ensuring that all of your tax returns are up-to-date is also essential for a successful application. By providing thorough financial documentation, you demonstrate your commitment to resolving your tax debt and improve your chances of being approved for the program.

Seeking Professional Help

If you need assistance navigating the Fresh Start Tax Program or your application has been denied, consider seeking professional help from a tax relief company. A tax relief company can provide you with the necessary assistance and guidance to help you with the application process, payment plans, and debt reduction options.

By partnering with a certified tax relief company, you can increase your chances of achieving a successful tax relief experience and get back on track with your finances.

Navigating the Offer in Compromise Process

The Fresh Start Tax Program offers a valuable resource to taxpayers in debt — the offer in compromise process. Through this form of negotiation, eligible individuals can settle their tax debt for a fraction of the original amount owed. To navigate this process, you can use the Pre-Qualifier Tool to determine your eligibility, submit an application with Form 656-B, and understand the available payment options and Low-Income Certification Guidelines.

With the right guidance and resources, you can successfully navigate the offer in compromise process and achieve the tax relief you need.

Pre-Qualifier Tool

The Pre-Qualifier Tool is a user-friendly online resource provided by the IRS that helps taxpayers determine if they qualify for an offer in compromise. By completing a short questionnaire, you can gain a better understanding of your financial situation and eligibility for the program.

Application Submission

Submitting an offer in compromise application is an essential step in taking advantage of this tax relief option. To submit your application, complete Form 656-B and submit it to the IRS along with the required documents and payment.

Be sure to sign and date the form, as well as include the necessary information for any other individuals listed on the form. 

Payment Options and Low-Income Guidelines

The Fresh Start Tax Program offers various payment options to help you manage and reduce your tax debt, including long-term payment plans (installment agreements) for those who owe $50,000 or less in combined taxes, penalties, and interest and have filed all required returns.

While there are no specific low-income guidelines for the program, the Fresh Start Tax Program can still help you with your taxes and provide relief based on your financial situation. By understanding the available payment options and guidelines, you can find the best solution for your unique circumstances.

The Fresh Start Tax Program offers a ray of hope for taxpayers burdened by tax debt. With its simplified payment procedures, expanded eligibility criteria, and various payment options, the program provides relief and assistance needed to get back on track with taxes. 

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Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

Fresh Start Program FAQs

  • To qualify for the Fresh Start Tax Program, you must meet specific eligibility criteria. These requirements include experiencing a 25% drop in income, having an annual income below $100,000 (single) or $200,000 (married), and owing less than $50,000 in tax debt.

  • Yes, the IRS has a program called the Fresh Start Initiative that provides options to taxpayers who have fallen behind on their taxes. This program can offer penalty relief, installment agreements, and, in some cases, offer in compromise, where the IRS agrees to settle for less than the total amount owed. However, the qualifications for this program are strict, and not everyone may be eligible.

  • Typically, if your business is structured as a corporation or a limited liability company (LLC), you may have some protection against personal liability for business taxes. However, there are exceptions. For instance, if you’re found to be responsible for not remitting payroll taxes, the IRS can come after you personally. It’s important to consult with a tax professional to understand your responsibilities and potential liabilities fully.

  • The Fresh Start Tax Program is a way to get back on track with the IRS. It enables qualifying taxpayers to break up their total tax debt into manageable payments, eliminating the need for penalties and collection letters.