Still Have Tax Debt? The IRS Fresh Start Initiative May Help

It’s neither easy nor fun to owe money to someone you can’t quickly pay back.  Historically, one tough entity to owe is the government. However, in recognition of the economic condition affecting millions of taxpayers, the Internal Revenue Service (IRS) announced the Fresh Start Initiative (FSI) earlier this year.  If you owe the IRS, this program just might help you get on your feet.

The Impact of the Fresh Start Initiative on Lien Creation

Arguably the most important component of the FSI is the changes to the IRS policy concerning liens.  (A tax lien—which represents the right to keep current or future property until a taxpayer’s debt is satisfied—can be placed by the IRS on property if  significant back taxes are owed.)  Historically, liens were often placed if back taxes owed exceeded $5,000.  Now, the dollar threshold has doubled to $10,000.  The reason why liens are so important is they can dramatically effect the credit of a delinquent taxpayer. If a Notice of Federal Tax Lien is filed, a notice that establishes IRS priority position against other creditors is provided to all the taxpayer’s creditors.  Needless to say, one who has poor credit is likely to incur further financial issues, making it that much harder for them to pay back the taxes owed.

Lien Withdrawl

The eventual release of a lien is, of course, critical—and the quicker it is withdrawn, the better.  There are two important changes to the lien withdrawal process. The first, according to the IRS, is that, “Liens will now be withdrawn once full payment of taxes is made if the taxpayer requests it. The IRS has determined that this approach is in the best interest of the government.”  I’d add, it’s also in the best interest of the taxpayers.

Secondly, certain taxpayers who enter into Direct Debit Installment Agreements may  have their liens released.  Among the key conditions required to qualify, is the current amount you owe must be paid down to $25,000 or less.  Furthermore, you must agree to fully pay the amount owed within a maximum of five years (possibly earlier in certain situations).  You must also successfully make three consecutive direct debit payments and not have defaulted on any previous debit installment agreements to qualify.

Installment Agreements and Small Businesses

Installment agreements are obligations to pay the taxes owed over a period of time.  Prior to the Fresh Start Initiative, small businesses would only qualify for an installment agreement if they owed less than $10,000.  Now businesses owing as much as $25,000 can qualify.  Enterprises, regardless of whether they file as an individual or business, can have up to 24 months to repay the debt.

Streamlined Offer in Compromise Process

The Fresh Start Initiative also offers a new Streamlined Offer in Compromise program.  An Offer in Compromise is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the amount owed.  The offer is not accepted by the IRS until they decide whether or not a taxpayer has the ability to pay based on the review of their assets and liabilities.  The new streamlined program minimizes the amount of financial information requests, requests information via personal calls, and has a quicker turnaround time in the decision process. Taxpayers with annual incomes up to $100,000 or less, and tax liability less than $50,000 when the offer is filed may be eligible.

No matter the amount you owe to the IRS, getting back on track will help you start to get your entire financial future in order. The recent Fresh Start Initiative presents tremendous opportunities to help you get back on track at the lowest possible cost and least amount of hassle.

For more information see IRS Announces New Effort to Help Struggling Taxpayers Get A Fresh Start

Michael Rubin

Author of the bestseller Beyond Paycheck to Paycheck, and the upcoming The Savings Solution, Michael B. Rubin is a Certified Public Accountant (CPA) and a CERTIFIED FINANCIAL PLANNER professional. In addition to his experience providing sophisticated financial advice to affluent clients, Michael has been a key source of information for over a decade to countless others. He speaks passionately about and provides guidance on virtually all personal financial planning topics. Michael has appeared in various media, including radio and TV stations across the country, plus national media such as CNN,, The Wall Street Journal,, Chicago Tribune, Financial Advisor Magazine, and Investment News. Prior to founding Total Candor LLC, Michael worked in the personal financial services practices of two of the former "Big Six" accounting firms. Subsequently working for several years as a new venture executive for Toys "R" Us, Inc., he made sure that he never actually grew up. He holds an undergraduate business degree from the Ross School of Business at the University of Michigan and an MBA from the Kellogg School of Management at Northwestern University. Michael lives in New Hampshire with his wife and children.

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