Dealing with debt has never been easy. The debt problem is even tougher for taxpayers who want to handle their tax burden without making their financial situation worse. So is struggling to manage debt a common problem? Well, the answer is that American taxpayers owe around $527 billion in tax debt, according to estimates. If this is the case, wouldn’t it be great if some individuals could address their tax debt? Well, it’s a good thing that the IRS provides the Fresh Start Program for free! How does this program work, and can it be useful? This article should offer some explanation!

Explaining the Fresh Start Program

People handle their debt problems differently from one another. Some people try to quickly solve their debt issue, while others ignore it, thinking they can escape it. That’s one reason why the IRS started offering debt relief options in 2011. Basically, the IRS aims to aid taxpayers in following the law while paying off their debt and other related penalties. This can all be done through the IRS’s Fresh Start Program. Hearing about the Fresh Start Program might give the impression that it’s one type of debt reduction aid. However, the various IRS debt relief options are all referred to by this general term. Having said that, through these opportunities, taxpayers can manage their tax burden without suffering from penalties. These penalties include levies, wage garnishments, jail time, and liens. Keep in mind that there isn’t one program that can help everyone. That’s because everyone’s debt situation is different. For this reason, the ideal strategy for dealing with debt will depend on the person’s circumstances.

It’s wise that people contact a tax expert before beginning the process. That’s because a tax professional may help the taxpayer take the right legal steps. So now that we know what the IRS’s Fresh Start Program is, let’s discuss the options offered by this program. These options consist of Offer in Compromise (OIC), Installment Agreement (IA), Currently Non-Collectible (CNC), and Penalty Abatement.

Offer in Compromise (OIC)

Usually, just about half of the individuals who apply for this program each year are accepted by the IRS. Thus, people applying for this opportunity may face some difficulties. That said, people should consult a tax expert for advice while applying. Also, in general, those who owe back taxes may find this option helpful. That’s because OIC might allow these individuals to settle their tax burden for less money than they actually owe.

The OIC Program: Things To Remember

To determine a person’s capacity to pay back their tax burden, the IRS will review their current financial condition. This is all done after the applicant completes and files their application. Sometimes the applicant will be asked for further details. Thus, a person applying should be ready to supply the necessary paperwork requested from them. So who can take advantage of this program? Basically, only those who have filed all of their prior tax returns in complete compliance will be able to take advantage of this opportunity. For the most part, the IRS looks back six years to figure out this information. Also, during the application process, it’s wise that individuals have a tax expert assist them. In fact, a tax expert can increase the likelihood that the IRS will approve a person’s application.

Let’s say the IRS rejects an OIC application. What happens then? It’s wise that people don’t get their hopes up for this opportunity. That’s because, generally, fewer than half of the people who apply for the program get approved. However, if someone’s application is denied, they may appeal the decision. Most importantly, the deadline for submitting the appeal is only one month from the date on the applicant’s rejection letter. So that is definitely something individuals need to keep in mind.

Installment Agreement (IA)

Everyone probably has the intention of paying their taxes. However, some people just need more time or can’t afford to pay the full amount upfront. Of course, everyone needs to comply with the IRS’s deadlines for filing their taxes. Which means a person who can’t pay the entire amount may be subject to levies, penalties, and possibly arrest. Having said that, through this program, taxpayers can extend the deadline for making their debt payments. Yes! Thankfully, the IRS and state taxing authorities frequently give taxpayers the option of paying off their debt. Thus, taxpayers could pay off their tax burden through predetermined payment plans or through installments.

So what are the steps before people apply for an IRS Installment Agreement? Anyone who wishes to start the application procedure should contact an accountant or tax expert for assistance. That’s because a professional can help a person find a suitable solution based on their circumstances. It’s also wise for anyone with a tax problem to begin the application procedure quickly! Taking fast action when it comes to tax obligations reduces the likelihood of a person facing debt-related problems.

Conditions to Qualify for an Installment Agreement

Many people would be happy to take advantage of this tax relief opportunity. However, like with any program, people first need to be eligible to take advantage. A person who is accepted for this program will need to be able to show proof of their situation via certain documentation. This includes the fact they are unable to pay the debt in full (which includes not being able to get financing from lenders). On top of that, they will need someone who is current with their tax filings.

Currently Non Collectible (CNC)

Individuals who owe the IRS a considerable sum of money but are unable to pay it back should consider this opportunity. That’s because the CNC tax program prevents a person’s unpaid taxes from being collected. As a person who wants to take advantage of this program, you will first need to meet its requirements. Applicants must first be accepted by the state and the IRS. Of the conditions that make someone eligible, a taxpayer has to make less than the limit of gross monthly income, set for their allowable expenses by the IRS/State. To clarify, the maximum monthly income for a person is in reference to federal guidelines. When a person reaches this limit, their financial statements will show that they are incapable of making the required payments. As a result, efforts to recover that person’s debt are halted.

The CNC Program Advantages

A perk of this program is that there’s a good chance for people who are enrolled in it to never have to make a payment on their debt. This is based on the fact that the statute of limitations on a person’s debt will remain in effect while they are in CNC status. Additionally, if a person’s tax debt reaches the 10-year statute, it is possible for it to be deemed not collective. This process is referred to as the “Collection Statute Expiration Date” (CSED). Which can easily be seen as one of the main advantages of the program.

The CNC Program: Things To Remember

The IRS/State decides who can take advantage of this opportunity. Thus, people need to follow all necessary IRS criteria. That includes presenting the required paperwork based on the IRS requirements. Failure to be prepared could ultimately make the application process time-consuming and complex. Keeping in mind anyone who doesn’t fully comply with the IRS rules can lose their eligibility for the program. Periodic financial reviews will be conducted by the IRS to keep an eye on those with CNC status. Based on that information, the IRS decides if a person’s financial situation puts them in a position to make partial or total payments.

Penalty Abatement

So how can penalty abatement be helpful to those dealing with penalties from the IRS? Essentially, when someone’s dealing with tax debt, the last thing they want are penalties. The thing about penalties is that they can rack up, ultimately making a large tax obligation even harder to pay. People facing tax problems should do two things: act quickly and hire a tax professional.

Seeking assistance is more common than not in these types of situations, when looking to take advantage of any tax relief opportunity. That’s because for this option, there will be codes and IRS terminology in the application that could require expert help, for better understanding. Thus, it’s important with tax-related problems that people don’t ignore them because they can get worse!

How Essential Is Reasonable Cause?

No one is exempt from paying tax. We all need to file our taxes on time. However, some individuals may have managed their tax return incorrectly because of serious circumstances. Thus, these people have the chance to provide evidence of a reasonable cause. Basically, a reasonable cause is a legitimate excuse for people who failed to handle their tax liability appropriately. Having said that, a reasonable cause has to be in the form of documents or paperwork. That means a person who wants to reduce their penalties should be ready to provide the most reliable evidence for their circumstances. Some examples of a reasonable clause would include serious illness, death, natural disasters, and so on.

In Conclusion 

Struggling to pay a tax debt is a difficult problem, but people could still address it. Luckily, the IRS wants people to get rid of their tax burden. This is why people should seek out the Fresh Start Program and the opportunities under it, which are: Offers In Compromise (OIC), Installment Agreements (IA), Currently Non-Collectible (CNC), and Penalty Abatement.
The best course of action for people is to quickly get started on resolving their tax issues. By doing this, a taxpayer can reduce the likelihood of facing tax-related penalties. Also, people should ask a tax expert to help them with the application. Basically, a professional will help people find a suitable solution for their problem!