IRS Fresh Start Initiatives for Back Tax Relief

Last updated on June 8, 2022

It is the wish of every taxpayer seeking back tax relief to get in the most out of their resolution. In March 2012, the IRS began various initiatives to assist taxpayers in achieving a resolution to their tax debt. It is important for taxpayers to understand the nuances of tax debt resolution so that they do not apply for a tax debt resolution plan they cannot qualify for.

For the year 2013, taxpayers can consider these Fresh Start initiatives of the IRS for their resolution of tax debt.

Back Tax Relief: Offer in Compromise

Many taxpayers find it difficult to pay back taxes because of financial limitations. To enable more taxpayers to comfortably achieve a resolution under an Offer in Compromise (OIC) tax debt payment plan, the IRS has introduced these changes:

• Fewer requests for additional financial information from taxpayers
• Requests for additional information are made by phone, not mail
• More flexibility in considering the taxpayer’s ability to pay
• More flexibility in determining the equity in assets
• More flexibility in determining the allowable living expenses
• Reduction in the amount of future income included in the offer
• Timeframe to complete the OIC payment process reduced to two years

Taxpayers can now enjoy greater flexibility in the financial analysis and evaluation afforded by the IRS in resolving their back taxes through the Offer in Compromise payment plan.

Back Tax Relief: Installment Agreement

An Installment Agreement is one of the most common IRS debt payment plans. Under the Fresh Start initiative, the maximum dollar criterion for Streamlined Installment Agreements is $50,000, as opposed to the previous maximum of $25,000. The maximum term also has been increased to 72 months, as opposed to the previous 60 months.

Under the Streamlined Installment Agreement, taxpayers are not required to provide a financial statement; limited financial information suffices in most cases.

The agreement is divided into two categories: a balance due of $25,000 or less, and a balance due of $25,001 to $50,000.

Small businesses who have employees may consider the In-Business Trust Fund Express Installment Agreement (IBTF-Express IA) to resolve their back taxes.

Back Tax Relief: Federal Tax Liens

Many taxpayers can now avoid aggressive IRS collection actions, such as a tax lien, because of an increase in the threshold of the federal tax lien filing. The previous threshold of $5,000 has been replaced with $10,000. It is important to note that the IRS has the power to place a lien on amounts less than $10,000 if they think fit.

Under the Fresh Start initiative, the IRS will issue a withdrawal of a filed Notice of Federal Tax Lien after the lien has been released. Taxpayers may use IRS Form 12277 to request the issuance of the withdrawal notice. Eligibility requirements must be met before applying for a withdrawal.

Taxpayers who are eligible and fulfill the requirements may have their filed Notice of Federal Tax lien withdrawn by the IRS after they have entered into a Direct Debit Installment Agreement.

Taxpayers who are looking for back tax relief may consider these initiatives before applying for a tax debt resolution plan. It may help them in achieving a faster and a more comfortable resolution.