Getting caught up in unpaid IRS back tax debt can have you asking yourself a bunch of questions. How can I pay off my IRS tax debt with a payment plan? Can I pay off my back tax debt for less than what’s owed? Am I in danger of having a back tax IRS lien filed against me? While finding a direct answer to any of these questions isn’t easy, the IRS does work with taxpayers and businesses to get to the goal of having the back tax debt paid off. You need a fresh start.
To do that, the IRS started what’s called the Fresh Start Initiative. This program makes it easier for taxpayers and businesses to pay back their back tax debt. It also helps them to avoid embarrassing tax liens.
The first part of the IRS’s Fresh Start Initiative is that it limited how the IRS can file federal tax liens against back tax debtors. All it used to take was $5,000 to enable the IRS to file a federal back tax debt lien.
But under the Fresh Start Initiative, it takes at least $10,000 of back tax debt for the IRS to file tax liens. Taxpayers should note that this rule isn’t too strict, however. The IRS can still file back tax liens on amounts less than $10,000 if the circumstances justify it.
The IRS’s Fresh Start Initiative also increases the number of IRS-approved installment plans.
Normally, the IRS required you to submit a financial statement if you had at least $25,000 in back tax debt. But that threshold’s now been increased to $50,000, making it much more convenient for back tax debtors looking to pay off their back tax debt over time. And if you pay your back tax debt through an installment plan, you have 72 months to pay the balance. It used to be 60 months.
The IRS’s Fresh Start Initiative also made changes to its Offer in Compromise program.
The changes essentially made this program, where people pay less than the entire amount of back tax debt, open to more people. What are the changes? The IRS keeps it vague. The bottom line is that it’s now more flexible in assessing whether a taxpayer is able to pay the back tax debt.
The IRS will generally accept an Offer in Compromise if it believes that the offered amount is the most that can be paid within a reasonable amount of time. Factors that go into this are a taxpayer’s ability to pay, income, expenses, and asset equity.
It doesn’t matter whatever situation you’re in. If it includes you being up to your neck in back tax debt, you’ll probably need some help to get it resolved.
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