Owe Money? Get a Fresh Start with the IRS Fresh Start Initiative
Are you behind on your taxes but still looking for a tax break? Sound too good to be true? Actually, you just might be the perfect candidate for the Internal Revenue Service Fresh Start Initiative.
In recognition of the challenging times many people continue to face due to the lackluster economic recovery, the Fresh Start Initiative (FSI) provides some people with a little breathing room.
The Fresh Start Initiative changed four components to help struggling taxpayers:
- Tax Liens
- Installment Payments
- Offers in Compromise
1. Tax Liens
The Fresh Start Initiative increases the Notice of Federal Tax Lien filing threshold from $5,000 to $10,000. Although the IRS might still choose to file a tax lien notice at a level less than $10,000, doing so is less automatic. In addition, the Fresh Start Initiative makes it somewhat simpler to have a lien withdrawn after payment. You can use Form 12277, Application for Withdrawal to request the lien withdrawal once you have filed all of your tax returns and paid all of your back and current taxes.
2. Installment Agreements
Like with Tax Liens, the Fresh Start Initiative’s provisions raised thresholds on balances due and the time given to pay tax liability. Specifically, the maximum total for streamlined installment agreements has been doubled by FSI from $25,000 to $50,000. Furthermore, the length of time you have to pay back the taxes you owe has increased from five years to six years. To start the Installment Agreement process, read the Instructions for Form 9465. Then, complete Form 9465, Installment Agreement Request.
The Fresh Start Initiative also provides for a streamlined Offer-in-Compromise process. An Offer-in-Compromise is IRS-speak for the IRS acceptance, as full payment of your back taxes, some amount less than the full amount owed. To determine if you’ll qualify, you’ll need to complete Form 656-B, Offer in Compromise Booklet.
The streamlined nature provided by the Fresh Start Initiative enables you to share less financial data and, generally speaking, provides you with more flexibility as it considers your ability to pay your tax liability.
4. Failure to Pay Penalties
If you are even a day late paying your income taxes, you are ordinarily subject to interest charges and penalties based on the amount of your payment shortfall. However, the Fresh Start Initiative allows you to delay paying your 2011 taxes due by April 17, 2012 until October 15, 2012 – without being subject to any failure-to-pay penalties. Interest will still be charged, however.
Taken together, these four benefits of the Fresh Start Initiative can be valuable in landing you back on your feet. If you’re behind on your taxes, consider taking advantage – the Fresh Start Initiative presents not only a great opportunity to get your finances back in order but also lets you sleep better at night.