The Fresh Start Initiative, introduced by the Internal Revenue Service (IRS) in 2012, enables qualified individuals an extension on paying overdue taxes. Typically, those enrolled in the program are unemployed or face other challenging financial circumstances. If approved for the program by the IRS, you can request an additional six months to pay your tax debt without having to worry about the application of new penalties.
You must pay your overdue taxes by October 15 in the year that the IRS approved you for the Fresh Start Initiative or you will face additional penalties. The benefit of the Fresh Start Initiative is that it provides people owing past-due taxes with an alternative installment structure. This makes it possible to avoid additional reviews by the IRS as well as new tax liens.
Do You Qualify for the Program?
Before you can even apply for the Fresh Start Initiative, you must have faced unemployment for at least 30 days in the last full tax year or before the tax cut-off date of April 15 of the present year. You can’t earn more than $100,000 as a single taxpayer or $200,000 for a married couple filing a joint return. Additionally, your outstanding tax debt must not exceed $50,000. This includes any penalties you have accrued. To prove eligibility if you’re self-employed, you need to show documented proof that your income has decreased by 25 percent or more from the last full tax year.
If you feel that you meet these qualifications, you can download IRS Form 1127 from their website. The name of the document is Extension of Time for Payment of Income Tax Due to Undue Hardship. The form asks you to explain in one paragraph your reason for applying to the program. You must also include supporting documentation such as an itemized list of expenses and income for the past three months and a statement of assets and liabilities as of the last day of last month.
Managing Federal Tax Liens While Enrolled in the Fresh Start Initiative Program
Another benefit of this program is that it increases the amount you must owe to the IRS before it can file a tax lien. When the IRS attaches a lien to your property, it retains the right of first payment before any other creditors. This includes the bank or finance company that holds the mortgage.
It’s also easier to get the IRS to withdraw the lien when you’re enrolled in this program. You can request that it does so as soon as you have paid the entire balance of your overdue tax bill. If you agree to pay your tax bill through direct debit from your bank account, the IRS may provide you with additional financial incentives.
The Fresh Start Initiative for Small Business Owners
This program is also available to small business owners who owe back payments to the IRS. To qualify, your outstanding taxes and penalties cannot exceed $25,000. You must also agree to pay the debt in its entirety within 24 months and sign up for direct debit from your small business bank account.
Get Professional Guidance Before Applying for a Tax Relief Program
Owing money to the IRS that you’re currently unable to pay is a stressful situation. This may cause you to apply for a program when something else might be a better fit. Before making any decisions, consider meeting with a Dallas Tax Attorney to ensure you understand all the available options.