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From time to time, there are moments in your life when you just wish you had a do-over. From a financial standpoint, few wishful scenarios compare with one which results in you incurring a tax debt. You may have heard about the IRS Fresh Start and wonder what this is and whether you qualify for it.
The Fresh Start initiative was designed to assist taxpayers who are struggling to resolve back tax issues. Some important aspects to this initiative include lien thresholds increasing from $5,000 to $10,000 owed (meaning, you likely won't be subject to a lien unless your debt is greater than $10,000) and the prevalence of Installment Agreements as being a practical method of tax debt resolution. But what does a "fresh start" mean to you? Depending on your circumstances, there are a couple of options that may provide you with an eventual clean slate with the IRS.
Installment Agreements
How do you begin to correct a problem with the IRS? The most effective method is to request a formal resolution which attends to your tax debt; one that is mutually beneficial for you and the government. For instance, you may logically understand that you are unable to pay a tax debt totaling thousands of dollars in just one payment. Concurrently, the IRS acknowledges that satisfying such a balance provides you with a potentially untenable financial position.
Ultimately, you may find solace in an Installment Agreement, which allows you to chip away at your debt over a period spanning several years. This agreement allows you a comfortable repayment option and, as long as you make your payments consistent and timely, puts you on the road to recovery with the IRS. One thing to keep in mind with an Installment Agreement is that part of what you're paying each month includes penalties and interest, which apply as long as even a portion of the liability remains unsatisfied.
Offer in Compromise
Some people view a tax debt settlement, or Offer in Compromise (OIC) as precious as a unicorn – and they often find actually getting one approved is every bit as elusive. If you meet certain eligibility requirements – largely concerned with your long-term inability to pay a tax debt vs. your promise to pay a sizeable sum in the short-term – an Offer in Compromise can be to your advantage. However, an OIC is notoriously difficult to qualify for and requires exposure of all of your intimate financial dealings, which may be far from ideal. Carefully review the qualifications to be considered a viable OIC candidate before requesting one.
The Power of a Professional
Perhaps your most powerful ally on your journey from the land of tax delinquency is a licensed tax professional. Since structuring the correct resolution plan for your IRS fresh start requires time and, ideally, experience, you may opt to entrust these details to a seasoned professional. Additionally, a tax resolution company can explore all of your options to square up with the IRS, and steer you from any path which doesn't lead to freedom from tax debt.