IRS Fresh Start Initiative
If you’ve fallen behind in paying your taxes and are looking at a large back taxes bill, penalties, fees, and possible liens, you should know that the IRS has a program set up to help you meet your obligations. Created in 2008 to help delinquent taxpayers suffering from financial difficulties, the IRS Fresh Start Initiative allows taxpayers to petition the agency to pay in installments, have liens withdrawn, and, in some cases, have their tax liability reduced.
At Tax Hardship Center, we’ve spent years helping individuals and small businesses work through the Fresh Start Initiative process. To greatly increase your chances of a successful outcome it’s best to enlist the aid of a professional like us.
Before we begin crafting a strategy we provide for a free, no-obligation consultation to examine the circumstances surrounding your back tax liabilities and discuss the relief you’re likely to qualify for through the Fresh Start Initiative.
We’ll open up a dialogue with the IRS on your behalf and begin building a strategy that balances delivering you the best outcome possible with an approach that’s most likely to be accepted by the agency.
We’ll keep you updated at every step as we submit the proper documentation and negotiate with the IRS to establish a reasonable payment plan, get tax liens withdrawn, and get you the tax relief you need.
What Tax Relief is Available Through the Fresh Start Initiative?
There are three general remedies available to delinquent taxpayers.
Installment Agreement: This establishes an installment payment plan, which can be structured a number of different ways.
Lien Withdrawal: Once you’ve paid off your tax debt you can petition to have any federal tax liens removed.
Offer in Compromise: If you can demonstrate that you’ll likely never be able to pay off your tax liability, an Offer in Compromise may be accepted, which reduces your total tax debt.
IRS Tax Relief
There are lots of reasons why people and businesses fall behind in paying their taxes. If this is you, and you’re looking at a large back taxes bill, with penalties and fees, you should know that you have options. There are a number of things you can do to prevent the situation from getting worse and to get help in satisfying your current tax liability.
At Tax Hardship Center, we’ll share the avenues available to you, and help you pursue them in a timely manner so that you can get out from under your mounting debt and create new habits that will help prevent delinquency in the future.
We start your journey with a free, initial consultation where we’ll discuss your current tax debt situation, get a sense of what you’re hoping to accomplish, and then go over your options and set your expectations.
Based on what we learn during your consultation our tax experts will research all of the programs you qualify for and determine which are likely to achieve the best outcome. We’ll then present these findings to you and make our best suggestion.
Once we’ve decided together on an appropriate course of action we will pursue the strategy with the IRS on your behalf and work to get you as much debt relief as possible, and a payment plan that suits your financial situation.
I’ve Heard Some Tax Relief Companies are Scams. Is This True?
Yes. Unfortunately, there are unscrupulous companies looking to take advantage of people. Here’s how to avoid them.
Avoid companies that don’t charge you an investigation fee.
Check to make sure they are properly licensed CPAs.
Avoid companies that make specific promises that are the same for every taxpayer.
Don’t give money to companies that aren’t clear and upfront about their charges.
State Tax Relief
If you’ve fallen behind in your state taxes you could be looking at a substantial back taxes bill, along with penalties and fees. Because tax laws vary from state to state it can sometimes be unclear how best to get out from under this debt and clean your financial slate. For most taxpayers, enlisting the aid of a tax professional is the smartest move they can make.
At Tax Hardship Center, we’re closely familiar with the tax laws across all 50 states and can help you determine your best course of action. We know your options, and can help you achieve the best outcome possible.
During your free, no-obligation consultation we’ll go over your finances and your current state tax liability and then discuss all of the options available to you. Don’t worry if you don’t understand something. We’ll work with you until you do.
We’ll take what we learn from your initial consultation and craft our best strategy, based on the applicable laws in your state and the programs available to you, and then share our best suggestion for the most promising solution to your debt problem.
Once we’ve decided together on the best course of action we’ll reach out to your state’s tax authority and begin negotiations on your behalf. At each step along the path, we’ll make sure you understand what’s happening so that you can feel comfortable we’re doing all we can to secure a good outcome for you.
Filing Your State Taxes Late
Remember that filing late is always better than not filing at all. The longer your tax liability goes unpaid the bigger your penalties will be. These fees add up over time and can balloon to difficult levels if you let them.
Currently Not Collectible Status
If the IRS determines that attempting to pay off back taxes puts a severe economic burden on a taxpayer, they can change the status on their account to “currently not collectible”. This pauses all collections efforts by the agency and removes all current levies. This status will stand until the taxpayer’s financial situation improves significantly enough that they can afford to begin paying down their debt.
Currently not collectible status isn’t easy to qualify for, and you need to already be in filing compliance before the agency will consider it. At Tax Hardship Center our tax professionals can explain in detail what’s required for this status and help you apply if it appears it might be for you.
During your free, no-obligation consultation we’ll discuss exactly what it takes to qualify for currently not collectible status and set realistic expectations for your chances of qualifying.
If it appears your financial situation meets the burden required, we’ll help first put together a plan to get you into filing compliance, and then help gather all of the necessary documentation to prove that the payment burden your tax debt will put you under is too much for you to bear.
We’ll work with the IRS on your behalf. Once we’ve established that you’re trying your best to pay your debt down, we’ll argue the case that your attempts represent a severe financial hardship that threatens to completely derail your finances. If the IRS agrees, they will set your status and all collections efforts will cease until your financial situation improves.
What Does it Take to Qualify?
This is a difficult, time-consuming process. Your finances will be exhaustively examined. You’ll need to provide documentation proving the legitimacy of every debt and every expense. However, if your need is great enough, the effort is absolutely worth it. And we can help take a lot of that burden off of you.
Offer in Compromise
If you’re facing an oppressively large back tax debt that you’re likely never going to be able to repay, an Offer in Compromise might be your best option for relief. If accepted, an Offer in Compromise allows you to satisfy your debt for less than you actually owe. However, the IRS rejects 60% of the OICs it receives. If you think this solution is the best for your situation, hiring a professional can mean the difference between success and failure.
At Tax Hardship Center, we’re familiar with OIC best practices, as well as the many other compromise options you have at your disposal. We can help get you the best outcome possible.
We’ll provide a free, no-obligation consultation to discuss your finances, your current tax debt, and what you’re hoping to accomplish with your Offer in Compromise. This will give us the information we need to move to the next step.
Once we have an accurate picture of your full financial situation we’ll research your options to find the best solution for you. That may be an Offer in Compromise or one of a number of other tax forgiveness alternatives.
Once we agree on a strategy we’ll engage with the IRS on your behalf, making sure that all necessary paperwork is completed properly, and then negotiate for terms that both you and the IRS can agree to. Throughout the process, we will keep you updated and explain anything you don’t understand.
Items to Be Aware Of
If you decide to pursue an Offer in Compromise, be prepared to gather and share quite a bit of detailed financial information with the IRS. They don’t make the process easy. It can also take up to two years for them to make a decision. Thankfully your situation is paused until their deliberation is complete.
Partial Pay Installment Agreement
A partial pay installment agreement is the installment agreement equivalent of an Offer in Compromise. Under this type of agreement, you’re only required to pay off a portion of your total tax liability in the time window established, instead of the entire amount. Assuming you make all of your monthly payments on time the IRS will consider your tax debt settled for the lower amount at the end of the installment term.
This can be quite a relief for taxpayers faced with large debts they can’t repay. However, you can’t use the streamlined installment agreement process, which limits the amount of financial documentation you need to qualify, with a partial pay agreement. You’ll need to submit the full amount of financial documentation needed to qualify for a traditional installment agreement, and this is no small amount.
If a partial pay installment agreement is the best option for you, and it appears that you can qualify, Tax Hardship Center can help you gather everything you need and do the hard work of submitting it properly. Qualifying for this type of agreement is not easy. It helps to have a professional in your court.
During your free, no-obligation consultation, we’ll gather information about your financial situation, including your income, total expenses, and your current tax debt.
We’ll then research all of the documentation you’ll need to submit, fill out all of the requisite paperwork, and get everything into proper order.
We’ll then file everything on your behalf and work with the IRS to get you approved. This sort of installment agreement won’t be accepted for everyone, but since we vet your chances before beginning, if we get this far you have a fairly good chance of being approved, particularly with our help.
Streamlined Installment Agreement
Normally a taxpayer is required to submit voluminous amounts of financial information to the IRS to qualify for an installment agreement. Streamlined agreements eliminate most of these requirements, making it significantly easier to qualify. Originally taxpayers could only take advantage of this simpler process if they owed less than $25,000 (or $10,000 for businesses). However, the IRS’s Fresh Start Initiative altered these amounts to under $100,000 for individuals and $25,000 for businesses. This means for the majority of taxpayers it is now significantly easier to qualify for an installment agreement.
However, there is still quite a bit of negotiation that goes into determining your monthly payment, and Tax Hardship Center can help. The last thing you want to do is get stuck with a monthly payment you really can’t afford.
During your free, no-obligation consultation, we’ll gather information about your financial situation, including your income, total expenses, and your current tax debt.
We’ll use this information to compute what a reasonable monthly payment is for you. You generally don’t want to take the IRS’s first offer, as it’s frequently unrealistic.
We’ll help you qualify for your installment agreement and then negotiate with the IRS on your behalf to help bring down your monthly payment to something you can afford. Ideally, you want a payment that’s high enough to pay your debt down as quickly as possible, but low enough that you don’t risk default by missing payments.
Why Does the IRS Set Unrealistic Monthly Payments?
The IRS wants any income above that needed to pay your basic bills — your discretionary income, to go toward paying down your tax debt. However, they often don’t use your actual bills as the basis for this calculation. Instead, they’ll use a standardized set of expenses called federal national expense allowances. These are averages. As a result what they consider discretionary income may be significantly more than you can afford. Negotiation is key to bringing this amount down.
Traditional Installment Agreement
A traditional installment agreement is the most basic form of payment plan offered by the IRS. The standard payment term for this agreement is five years. Your debt must be fully paid by the end of that period, and the IRS will establish consistent monthly payments that will take no longer than that term to pay off your debt. To qualify you’ll need to submit a large amount of documentation, detailing your entire financial situation — all income sources, expenses and debts. You’ll need to prove each and every piece of your financial picture.
At Tax Hardship Center our tax professionals know exactly what goes into qualifying for a traditional installment agreement, and we can remove a lot of the burden from your shoulders. This isn’t something you should do alone.
We’ll speak with you to discuss your situation. This is free, and there’s no obligation. We’ll discuss your options and let you know what to expect from the installment agreement application process.
Considering your unique situation, we’ll research the necessary documentation, pull it all together into the proper order, and get it ready for submission.
We’ll then work with the IRS on your behalf, submitting all of the required documentation. If you’re approved we’ll negotiate to get you a monthly payment you can afford. Because you continue to accrue interest and penalties as you pay off your debt, it’s best to try for the highest payment amount that isn’t overly burdensome. If you can pay off your debt in less than five years you can save yourself a good bit of money.
What About the Streamlined Installment Plan?
Most individual taxpayers and some businesses can now qualify for a streamlined installment agreement that makes qualifying significantly easier. We’ll let you know if you qualify for this. If you don’t, and you don’t qualify for any of the other installment agreement types, the traditional installment agreement is your only choice.
Conditional Expense Installment Agreement
If you have significant additional expenses, called conditional expenses, such as personal loans or credit card debt, that make your monthly installment payments difficult to meet, you can qualify for a conditional expense installment agreement. Under this agreement, you can qualify for a lower monthly payment as long as you can reasonably pay your debt off in six years instead of the standard five.
Because a conditional expense installment agreement requires a voluminous amount of financial documentation to be submitted to demonstrate your full current financial situation, it’s best to get professional help. Tax Hardship Center is extremely knowledgable about IRS installment agreements and can help with the burden.
We’ll discuss your entire current financial picture during a free, no-obligation consultation, where we can determine whether a conditional expense agreement is best for you and whether you’re likely to qualify.
If it appears that you will qualify, we’ll begin gathering all of the requisite documentation in order to prove your financial need.
We’ll work with the IRS on your behalf, doing everything we can to achieve the fairest agreement possible, and keep you fully updated as your case progresses.
More Information About Conditional Expenses
You’ll only qualify for lower monthly payments and the extended, six-year payment period if your total conditional expenses allow for the requisite payments. If they don’t, the IRS can grant you one additional year to try and pay off or otherwise eliminate some of these conditional expenses.
After this one year period, if you’ve managed to bring your conditional expenses down far enough to allow your tax debt to be fully paid within the six-year period prescribed for a conditional expense agreement, your remaining conditional expenses are allowed, your monthly payment will be set lower, and your payment period will be extended from five years to six.
If you’ve ever made a large purchase, like a car or a home, then you’re familiar with installment agreements. An installment agreement with the IRS works in much the same way. You can petition them for a payment plan that allows your total tax debt to be split over some number of months, at a monthly rate that you can afford. However, the process can be tricky to navigate. It’s best to enlist the help of a qualified professional.
At Tax Hardship Center, we can help you through the entire process. We know what the IRS is looking for and we know how to structure install agreements to maximize your chances of success.
During your free, no-obligation consultation we’ll gather information about your financial situation and your total back taxes. We’ll also discuss what you’re hoping to achieve and what monthly payments you can afford.
Armed with this information we’ll craft a custom strategy that takes into account common IRS reactions to payment plan requests similar to yours. We’ll build a strong case for why your unique situation warrants acceptance.
We’ll work through the full installment agreement submission and consideration process with the IRS on your behalf, keeping you fully updated at all times. You’ll know the current state of your case as soon as we do.
If My Installment Agreement is Accepted Do I Still Accrue Penalties?
Unfortunately, yes. An installment agreement doesn’t change your tax liability. It simply makes it easier to satisfy. You’ll still accrue interest and penalties at the same rates you would without a payment plan in place. Therefore if there are months where you can afford to pay more than your normal installment amount, you absolutely should. The sooner you get your full debt paid off the better.
Tax Audit Representation
Audits aren’t as common as you might think, and often only require the taxpayer to answer a few simple questions. However, if the IRS finds substantial problems with a previous year’s returns an audit can be substantially more involved. In this case, it’s a good idea to procure representation from experienced tax professionals. The IRS knows tax law inside and out. You need someone in your court that knows it just as well.
At Tax Hardship Center, we have the experience necessary to secure the best outcome possible for our clients. Don’t leave your audit to chance. Let us help.
Audits can be nerve-wracking, so we try to make you as comfortable as possible. During our free, no-obligation consultation we’ll discuss your current financial situation, the reasons for your audit, and what you might expect from the audit process.
Once we understand your financial picture and the issues the IRS has with your tax returns, we’ll research your options and formulate a plan to satisfy the IRS while avoiding major financial repercussions.
Our tax experts will meet with or correspond with your auditor on your behalf, answering all of their questions as thoroughly as possible, mindful of your best interests and the possibility of auditor overreach. Throughout the process, we’ll keep you fully updated.
What to Look for When Seeking Tax Audit Representation
You want quality representation. Make sure to look for someone that is:
Fully licensed and qualified to engage with the IRS or your state tax authorities
Experienced working with the IRS and tax audits
Knowledgable about applicable tax law
Fully transparent with their pricing so that there are no surprises halfway through your audit
Experienced with the proper procedures for contesting an undesirable outcome, should that happen
Contrary to what you might think, IRS penalties aren’t unforgivable. There are a number of situations in which penalties can be abated. Some of these are relatively easy to qualify for, and some are considerably more difficult. But if you can prove that you meet the requirements for a given abatement process, the IRS will lift the penalty or penalties in question. This can provide significant relief for people that need it.
At Tax Hardship Center we’re experts in this area and can explain the requirements to you as well as help you determine if you qualify. If you do, we can help you through the application process.
We’ll speak with you for a free, no-obligation consultation, during which we’ll discuss your full financial picture and talk about which abatement procedures you might be able to take advantage of to reduce your debt liability.
We’ll then pull together all necessary documentation, which can range from mild to extremely rigorous, and then prepare your application package for submission.
After submitting all of the required documentation we’ll work with the IRS on your behalf, arguing your case and demonstrating why your application should be approved. As the process unfolds we will keep you constantly updated.
What are Some Common Penalty Abatement Procedures?
The easiest procedure to qualify for is the first-time abatement. If you’ve never had any other issues with the IRS and are fully compliant other than the penalty in question, you can qualify to have your first penalty abated, assuming it’s abatable, generally with nothing more than a request. This will only apply to one tax year.
For penalties of a larger scope, the qualification burden is much more stringent. If you can prove there was a very good reason you ran afoul of the rules, like a natural disaster, major medical issue, or some other serious situation that was outside of your control, penalties can be lifted. Alternately if you can prove that an IRS mistake or bad advice from an IRS agent caused your penalties, you can also have them abated.