IRS fresh start program

Do you want to know if you may get your IRS bill forgiven? The quick answer is yes. However, it is advisable to seek expert help to gain forgiveness. Look at what every taxpayer should know about the IRS debt forgiveness program.

In 2021, more than half (57%) of American families did not pay federal income taxes. Because of their financial circumstances, the IRS ruled that those families did not have to pay taxes.

If you also have an enormous tax burden, it makes sense to know that the IRS will work with you. However, if you cannot pay a significant tax debt, the IRS may offer you other options. One of these options is IRS debt forgiveness. By reading on, you can learn all you need to know about this valuable tax relief program.

Why you should start with contacting the IRS

What’s vital to remember is that when you’re deeply in debt, the last thing you want to do is ignore it. To begin, the IRS will mail you notifications to advise you of your debt. If you choose to ignore their communications, they will start charging penalties and, over time, interest. The best thing to do is face your debt and contact the IRS. Historically, the IRS has been quite tolerant of first-time tax offenders, and there are now several options for resolving your tax obligation.

Offer In Compromise

A type of agreement between the taxpayer and the IRS known as an Offer in Compromise (OIC) outlines and resolves the taxpayer’s tax responsibilities for less than the total amount currently owed. The taxpayer would typically not be qualified for an OIC if all of the obligations could be settled through an installment plan or some comparable arrangement.

The taxpayer must have submitted all tax forms, made the necessary estimated tax payments for the current year, and, if a business owner with employees, made the necessary federal tax contributions for the current quarter to be eligible for the OIC program.

Settle their debt for less than they owe, with the settlement amount based on what they can realistically afford to pay. Sounds like a dream, right? The IRS will generally approve an OIC request for three reasons:

  • Doubt as to Collectibility
  • Doubt as to Liability
  • Effective Tax Administration

Who Is Eligible

To emphasize, it is not always necessary to get professional help for your tax debt. Using the Offer in Compromise Pre-Qualifier Tool made by the IRS, you may confirm your eligibility and write a tentative proposal. Using the tool can help you avoid expensive tax help,

If you meet the following criteria, you may be eligible for an Offer in Compromise:

  • You filed all necessary tax filings and paid all necessary projected payments.
  • You’re not involved in an ongoing bankruptcy action
  • You have a valid extension for your current-year tax return 
  • You are an employer who has made tax deposits for the current and previous two quarters.

Qualifying for the IRS Fresh Start Initiative

The IRS has expanded its Fresh Start initiative to make it easier for taxpayers to qualify for an OIC. These Fresh Start initiative modifications make financing your IRS tax payments more manageable. In addition, you will no longer be required to provide the IRS with crucial financial information for them to assess your capacity to pay.

Instead of looking at half a decade of future income to evaluate reasonable collection potential, the IRS now looks at only two years of future income for offers, depending on the payment period. Moreover, taxpayers can now make minimum payments on federally insured post-secondary education debt.

Under certain situations, including financial difficulty, taxpayers may pay unpaid federal, state, or local taxes if they cannot pay them in monthly installments. This is caused by the inability of the IRS to cause financial hardship, making them act in the debtor’s best interest. The IRS is becoming increasingly forgiving of first-time tax offenders. The IRS has extended the requirements for Allowable Living Expenses. This allowance now covers credit card payments, bank fees and penalties, and other allowances. Moreover, the IRS has quadrupled the threshold for taxpayers qualifying for Installment Agreements, allowing more people to qualify.

Key takeaways

  • Do not overlook the issue. The IRS will not comply. Apply for an extension if you’re unable to pay in time. The late filing penalty is 5% of the tax owed every month, with a maximum penalty of 25% of the sum. In addition, there is also an underpayment penalty of up to 1% every month of the due sum, with a maximum penalty of 25%. If you fail to file your tax return or make any payments on your obligation, your tax debt will quickly rise.
  • Be honest with yourself about your position. The IRS seldom forgives tax obligations. A request for an “offer in compromise” on Form 656 is made to settle your tax debt for less than you are owed. Only those in need of financial assistance are given such offers. If you or a family member has incurred enormous medical expenses, or if you lost your job and have few prospects for finding employment in the future, you may be eligible. It doesn’t occur very frequently.

The Bigger Picture of Tax Debt

The IRS’s debt forgiveness proposal would likely benefit some people, but it would increase the national debt and cause inflation. Furthermore, it establishes a new precedent and expectation for additional debt forgiveness, which would raise the national debt and inflation. It may potentially boost tuition rates as more students regard loans as grants.

However, the IRS’ ambition to lift the tax burdens is an excellent development for people in debt. Tax debt for first-time offenders can have a significant impact on their financial well-being, and the IRS is working hard to come up with the most reasonable solutions. If you cannot figure it out and need professional help, don’t hesitate to contact one of the certified tax professionals at Idealtax.com. They will be able to help you negotiate your tax repayment with the IRS. 

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