Are you afraid to get your mail because you’re scared you’ll find yet another dunning letter from the IRS? Is it threatening to garnish your wages or put a lien on your house? It is scary to get in trouble with the IRS because it has so much power. You might feel as if you were David versus the Goliath that is the IRS and there you stand without even a slingshot. You may be waking up with the night sweats or maybe you can’t sleep at all. Owing the IRS back taxes is one of the worst things that can happen to you financially and what’s even worse is that the problem will never go away – until you make the IRS happy. The harsh truth is that it holds all the cards because it has all the power. While it can’t send you to debtor’s prison anymore it can make your life a living hell and maybe even take your home.
There have been a number of songs dedicated to the idea of getting happy. In fact, there’s a song from the 1950s titled “Get Happy” and more recently there was the Pharrell Williams’s song “Happy”. If you’re in big time trouble with the IRS you might not think you’ll ever be able to get happy. But there is good news. It’s because believe it or not the IRS actually wants to help you. In fact, it wants to give you a fresh start and yes, literally, a fresh start with a program of the same name.
What the IRS has said
The Internal Revenue Service has said through Commissioner Doug Shulman that, “This phase of Fresh Start will assist some taxpayers who have faced the most financial hardship in recent years … It is part of our multiyear effort to help taxpayers who are struggling to make ends meet.” A simpler way to explain the Fresh Start program is that it’s designed to make it easier for you to pay your back taxes and avoid tax liens. Here are the three most important parts of this program
1. Tax liens
First, the IRS has increased the amount that you owe before it will file a Notice of Federal Tax Lien. That amount is now $10,000 though in some cases you could get a tax lien notice if you owe less than $10,000. In addition, you might qualify to have your notice withdrawn if you are paying your tax debt through a Direct Debt Installment agreement.
2. Installment agreements
The Fresh Start program has now expanded access to and streamlined its installment agreements. If you owe up to $50,000 you can now repay your debt through monthly direct debt deposits for up to six years (72 months). You probably will not need a financial statement to take advantage of its Installment Agreement but you may need to provide some financial information. If you are interested in applying for a payment plan the IRS has an Online Payment Agreement available on IRS.gov. There is also IRS Form 9465, Installment Agreement, which you could use to apply if you don’t have access to the Internet.
Note: If you owe more than $50,000 and need more than six years to repay your debt, you will be required to provide the IRS with a financial statement.
3. Offers in Compromise
You could get caught up on your IRS tax debt through an Offer in Compromise (OIC). This is where you would be allowed to settle your tax debt for less than the full amount. Fresh Start has expanded this program so that the IRS now has added flexibility when analyzing your ability to pay. This makes the program available to more taxpayers. In general, it will accept an OIC if it believes that it cannot expect the full amount from you within a reasonable amount of time. However, the IRS will not accept an OIC if it believes you could pay the amount owed through a payment agreement or as a lump sum. Before approving an OIC the IRS will look at several different factors including your income and assets before making a decision regarding your ability to pay. IRS.gov has a tool called the Offer in Compromise Pre-Qualifier you could determine whether or not you might be eligible for an OIC.
In as few as two years
The changes that have made to the Offers in Compromise could help you resolve your tax problems in as few as two years compared to the four or five years in the past. These changes include:
- The calculation for your future income has been revised
- You are now allowed to repay your student loans
- You are also allowed to pay delinquent state and local taxes
- The Allowable Living Expense allowance category has been expanded. For example, you can now include as part of your allowable living expense things such as credit card payments and bank fees and charges.
Other things you need to know
There are some other important things you need to know about paying your back taxes. One is that you now may be able to get a short amount of additional time to pay your tax in full. You can request this through the Online Payment Agreement application at www.IRS.gov or by calling 1-800-829-1040.
Use a credit card
Second, you can now pay your tax bill by using a credit card. This could be a good deal if the interest rate on your card is lower than the interest and penalties you would be required by the Internal Revenue Code. If you think this idea might make sense, contact Link2Gov at 1-888-9PAY-TAX or www.payUSAtax.com.
Online payment agreement
If you owe $25,000 or less in combined tax, interest and penalties you can ask for an installment agreement using the Online Payment Agreement application at www.IRS.gov.
If you request an installment agreement and the IRS approves it, you will be charged a one-time user fee. If it’s a new agreement the fee will be $105 or $50 if you have the payments deducted directly from your bank account.
You don’t need professional help
Finally, you may have heard those radio commercials offering to solve your tax problems for you. Some even refer to the Fresh Start program. You really don’t need to go to any of those companies for help. You could go to IRS.gov site, review the information available and then determine if and how Fresh Start could help you. The IRS does want to give you a fresh start and it provides all the information you would need to take advantage of this program.
Solve that tax debt with a fresh start and sleep better nights. Go to www.irs.gov, and learn all about the Fresh Start program and how you could use it to resolve your income tax problems. It could be a lot better than those night sweats.