IRS Tax Tip 2013-57, April 17, 2013
The IRS Fresh Start program makes it easier for taxpayers to pay back taxes and avoid tax liens. Even small business taxpayers may benefit from Fresh Start. Here are three important features of the Fresh Start program:
- Tax
Liens. The Fresh Start program increased the amount that
taxpayers can owe before the IRS generally will file a Notice of Federal
Tax Lien. That amount is now $10,000. However, in some cases, the IRS may
still file a lien notice on amounts less than $10,000.
When a taxpayer meets certain requirements and pays off their tax debt, the IRS may now withdraw a filed Notice of Federal Tax Lien. Taxpayers must request this in writing using Form 12277, Application for Withdrawal.
Some taxpayers may qualify to have their lien notice withdrawn if they are paying their tax debt through a Direct Debit installment agreement. Taxpayers also need to request this in writing by using Form 12277.
If a taxpayer defaults on the Direct Debit Installment Agreement, the IRS may file a new Notice of Federal Tax Lien and resume collection actions. - Installment
Agreements. The Fresh Start program expanded access to
streamlined installment agreements. Now, individual taxpayers who owe up
to $50,000 can pay through monthly direct debit payments for up to 72
months (six years). While the IRS generally will not need a financial
statement, they may need some financial information from the taxpayer. The
easiest way to apply for a payment plan is to use the Online Payment
Agreement tool at IRS.gov. If you don’t have Web access you may file Form
9465, Installment Agreement, to apply.
Taxpayers in need of installment agreements for tax debts more than $50,000 or longer than six years still need to provide the IRS with a financial statement. In these cases, the IRS may ask for one of two forms: either Collection Information Statement, Form 433-A or Form 433-F. - Offers
in Compromise. An Offer in Compromise is an agreement that
allows taxpayers to settle their tax debt for less than the full amount.
Fresh Start expanded and streamlined the OIC program. The IRS now has more
flexibility when analyzing a taxpayer’s ability to pay. This makes the
offer program available to a larger group of taxpayers.
Generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer’s income and assets, to make a decision regarding the taxpayer’s ability to pay. Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC.
IRS Circular 230 Disclosure
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
Pursuant to the requirements of the Internal Revenue Service Circular 230, we inform you that, to the extent any advice relating to a Federal tax issue is contained in this communication, including in any attachments, it was not written or intended to be used, and cannot be used, for the purpose of (a) avoiding any tax related penalties that may be imposed on you or any other person under the Internal Revenue Code, or (b) promoting, marketing or recommending to another person any transaction or matter addressed in this communication.
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