IRS Fresh Start may expand tax payment options, but there’s one thing to watch out for

As we approach Tax Day in April, many Americans still need to file their taxes in the coming weeks. The IRS has reported receiving about 78.8 million tax returns so far, slightly down from the previous year. If you haven’t filed yet, you still have time until the April 15 deadline to file your federal tax return and pay any amount you owe. It’s important to note that failing to pay your taxes in full can lead to increased tax costs.

For taxpayers who owe balances, there are options available to repay the IRS, including payment plans and forbearance programs. However, some companies may advertise promising to settle your tax debt for a lower cost than you owe. It’s crucial to be cautious of these promises, as they may not always deliver on their guarantees and offer services that can be obtained directly through the IRS.

The IRS’s Fresh Start program, launched in 2011, aimed to assist struggling taxpayers in paying back taxes and avoiding tax liens. The program expanded the offer in compromise (OIC) program to include taxpayers earning up to $100,000 who owe less than $50,000. An offer in compromise allows eligible taxpayers to settle their debt with the IRS for less than the full amount owed based on their income and assets.

Additionally, the Fresh Start program raised the dollar amount taxpayers must owe before the IRS files a lien against their assets and property. It also allowed taxpayers to request the lien be withdrawn after payment. These changes still apply to eligible taxpayers today.

To determine if you qualify for offers in compromise and lien withdrawals, you can submit an offer to the IRS online to settle your tax debt at a lower amount. You can apply for an OIC yourself, and the IRS will consider various factors, including your income, expenses, and assets, to determine if your offer will be accepted.

If the IRS places a lien on your property, you can request a withdrawal after paying what you owe. This can help improve your credit score, even if you still have a tax balance. Direct debit installment agreements are long-term payment plan options available to taxpayers with balances of $50,000 or less, allowing monthly payments for up to 72 months.

In addition to offers in compromise and lien withdrawals, there are other options available for taxpayers facing financial hardship, such as short-term and long-term payment plans, placing your account in currently not collectible status, or using a personal loan or credit card to pay your taxes.

It’s essential to explore all available options and consider your financial situation before deciding on the best approach to handle your tax debt. By understanding the IRS programs and eligibility requirements, you can take the necessary steps to address your tax obligations and achieve financial stability.