The IRS has expanded its “Fresh Start” program by providing more flexible terms in its Offer-in-Compromise program. This will allow more financially distressed taxpayers to clear up their tax problems quicker than in the past. The changes announced by the IRS include revising the calculation for the taxpayer’s future income, allowing taxpayers to repay their student loans, allowing taxpayers to pay state and local delinquent taxes, and expanding the allowable living expense allowance category and amount. The IRS has made other revisions including how it determines a taxpayer’s reasonable collection potential and will look at future income from shorter periods in deciding a taxpayer’s ability to pay a tax liability. Lastly, the expanded allowable living expense standards incorporate average expenditures for necessities, and now include additional allowed expenses, such as bank charges and credit card payments.
The Internal Revenue Service just introduced another expansion of its “Fresh Start” initiative by adding more flexible terms to its Offer in Compromise program that will allow some of the most financially challenged taxpayers to clean up their tax debts faster than in the past.
This new program focuses on the financial analysis used to figure out which taxpayers will qualify for the Fresh Start Program. This program allows some taxpayers to clear their tax issues in as little as two years in comparison to four or five years in the past.
In certain instances, the revisions recently announced include:
• Changing the calculation for the taxpayer’s future income.
• Allowing taxpayers to pay back their student loans.
• Letting taxpayers pay state and local delinquent taxes.
• Broadening the Allowable Living Expense allowance category and amount.
Overall, the Fresh Start program is an agreement between a taxpayer and the IRS that settles the taxpayer’s tax liabilities for less than the full amount owed. It is usually not accepted if the IRS thinks the liability can be paid in full as a lump amount or a through payment agreement. The IRS reviews the taxpayer’s income and assets to make a determination of the taxpayer’s reasonable collection potential.
The IRS understands that many taxpayers are having difficulty paying their bills. As a result, the agency has been working to put in place easier changes to the Fresh Start program to reflect real life scenarios.
When the IRS calculates a taxpayer’s reasonable collection potential; it will look at only one year of future income for offers paid in five or fewer months, down from four years; and two years of future income for offers paid in six to 24 months, down from five years. All of the offers need to be fully paid within 24 months of the date the offer is accepted.
Living Expenses Allowed
The Allowable Living Expense guidelines are used in circumstances requiring financial analysis to decide a taxpayer’s ability to pay. The standard allowances allow consistency and fairness in collection determinations by using average expenditures for basic necessities of people in similar geographic areas. These guidelines are used when looking at an installment agreement and offer in compromise requests.
If you have a back tax balance that you are unable to pay, our tax settlement professionals can help you determine if the Fresh Start Initiative would work for you. For more information about our services, visit us today at www.professionaltaxresolution.com. With over 16 years in the business of resolving tax debt, we have a thorough understanding of tax law together with the experience to know which settlement option will be the best fit for your specific set of circumstances.
For more information about our tax debt resolution services, visit us today at www.professionaltaxresolution.com. Contact us by phone at 888-534-2457 to receive a free, no obligation consultation.
