IRS’ Tax Debt Relief: Fresh Start Initiative

Posted on December 26, 2022

IRS’ Tax Debt Relief: Fresh Start Initiative

The IRS introduced its Fresh Start initiative to help taxpayers resolve their tax debt cases easily. The Fresh Start initiative has reduced qualifying requirements for certain tax debt payment plans, and provides greater flexibility in the process of paying IRS tax debt. The Fresh Start initiative affects only certain payment plans.

IRS Tax Debt Resolution: Installment Agreement

Under the IRS’ Fresh Start initiative, taxpayers that owe the IRS up to $50,000 in tax debt can pay their back taxes using an Installment Agreement without sharing extensive financial information. There are different types of Installment Agreements categorized by the amount of tax debt owed. If the amount of tax debt owed is $50,000 or less, taxpayers may choose the Streamlined Installment Agreement to resolve their tax debt. Although the IRS requires access to certain financial information, this financial disclosure is limited. The maximum filing threshold for Streamlined Installment Agreement before the Fresh Start initiative was $25,000.

In addition to raising the filing threshold for Streamlined Installment Agreement, the IRS has extended the maximum payment term from 60 months to 72 months. Taxpayers can now pay their tax liability over 72 months.

IRS Tax Debt Resolution for Small Businesses

The IRS’ In-Business Trust Fund Express Installment Agreement (IBTF-Express IA) allows small businesses to resolve their IRS tax debt without sharing a financial statement with the IRS or undergoing financial verification. To be able to qualify for an IBTF-Express IA, the maximum amount of tax debt a small business can owe is $25,000. Those that owe more than $25,000 may make a lump sum payment to bring down their tax debt down to $25,000 or less, and then qualify for the IBTF-Express IA.

Along with the maximum filing threshold, taxpayers must be able to pay the entire tax debt amount within 24 months or before the expiration of the collection deadline, whichever is earlier.

Taxpayers that owe taxes between $10,000 and $25,000 can pay their tax debt through the Direct Debit Installment Agreement (DDIA).

Choosing a Payment Plan for IRS Tax Debt Resolution

Taxpayers should choose the tax debt payment plan that they qualify for and that provides them the most benefits. There are various kinds of payment plans that the IRS offers, including Offer in Compromise, Currently Not Collectible and many types of Installment Agreements to resolve back taxes even if the full amount or any amount in tax debt cannot be paid.

Choosing the most appropriate IRS tax debt resolution plan is an important step for the successful resolution of IRS tax debt. Therefore, taxpayers that are not confident about resolving their tax problem themselves may use professional help.