Get Renewed with the IRS Fresh Start Initiative

For many taxpayers who owe back taxes to the Internal Revenue Service, it is hard to settle tax debt. The added expenses and penalties associated with being unable to pay off a large sum of debt at one time complicate matters and can overwhelm taxpayers. However, the IRS established the Fresh Start Initiative, which is meant to alleviate the stress and weight of tax debt and allow taxpayers to move toward financial stability. Below is some information about the program, including payment methods that taxpayers can use to get rid of their tax debt. 

History and Purpose

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Credit: LendingMemo

The IRS established the Fresh Start Initiative in 2011. Formerly referred to as the Fresh Start Program, the Fresh Start Initiative is a set of tax code changes that were made to help more people struggling to repay tax bills. This program is meant to help taxpayers, including small business owners, who are willing but unable to pay off their tax debt. The goal is to offer assistance to taxpayers without the threat or added expense of liens and penalty fees.

Fresh Start Repayment Methods

For most individuals, it is best that they reach out to the IRS directly and avoid contracting third-party firms to protect themselves from fraud and scams.  There are three main options available to those seeking assistance in paying off their IRS tax debt. Decide which of the following methods is the most appropriate for you. 

  1. Payment Plan: The instalment payment plan is one that is likely to help the majority of taxpayers seeking to resolve their debt. It is in place to reduce the fees and penalties associated with paying late and can even help some on short-term payment plans to avoid fees altogether. Short-term plans are usually less than 120 days (roughly four months) and the terms for these plans and the longer-term plans must be negotiated on an individual basis. You will be asked to fill out Form 433-F and Form 9465 and submit them in accordance with IRS regulations and timelines. 
  2. Offer in Compromise: An offer in compromise is the option most closely connected to tax forgiveness. However, it is a compromise that the taxpayer and the IRS reach where the taxpayer can settle their debt for less than what they owe. If you would like to make an offer in compromise, you will need to meet certain requirements to qualify for this option. The IRS will consider things such as your expenses, income, ability to pay, and asset equity. Additionally, you will need to fill out Form 656.  
  3. Currently Non-collectible: This is a temporary form of assistance available to those who can prove a sudden and temporary financial hardship, such as unemployment or underemployment. It is a freeze on your account. This freeze does not erase the amount you owe the IRS but it does stop collection on your debt until you can start making payments.

If you are willing but unable to pay off your tax debt, the IRS is willing to help you. Understanding the process and options available under the Fresh Start Initiative Program is the first step to taking control of any outstanding IRS tax debt and becoming debt-free.

About Mohit Tater

Mohit is the co-founder and editor of Entrepreneurship Life, a place where entrepreneurs, start-ups, and business owners can find wide ranging information, advice, resources, and tools for starting, running, and growing their businesses.

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