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In 2011, the IRS issued an IR-2011-20 called “IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start”. It is important to note that nothing in the announcement actually acts to reduce your tax liability. The so-called “Fresh Start Program” was merely an effort on the IRS’s part to remove some of the red tape and make it a little easier for struggling taxpayers to pay off their tax liability.

The program made a number of changes to tax law enforcement:

1. Reduced the dollar threshold for a tax lien.
2) Made it easier to obtain a lien withdrawal.
3) Make withdrawing liens automatic when taxpayers enter a certain type of installment agreement.
4) Gave small businesses easier access to Installment Agreements.
5) Gave more taxpayers access to Offers in Compromise.

Although the IRS said they would reduce the dollar threshold for a tax lien, they have never made this dollar amount public. Some commentators allege the amount is $10,000 or less, but this is speculation.

What is a Tax Lien?

A federal tax lien is the government’s legal claim against your property after the IRS determines that you have an unpaid tax debt. The lien attaches to all of your property (real estate, personal property, and financial assets) in the present and future, even attaching to your estate after death. It is automatic the moment the IRS determines you have a tax liability pursuant to IRC section 6321. The IRS then files a public document, the Notice of Federal Tax Lien, which alerts other potential creditors that they have a claim against your property.

Generally, there are two primary ways to remove a tax lien: paying the tax debt in full and withdrawing by means of filing a request. There is a third way called Subordination, though this does not actually remove a federal tax lien. This method allows other creditors to move ahead of the IRS on a debt in order to make it easier for a taxpayer to sell or re-finance the property on which the lien has attached.

However, a tax lien is not always removed automatically once the debt is paid, even though IRC section 6325 requires it. Often, the taxpayer must request that it be removed. A taxpayer can receive a certificate from the IRS stating that a particular lien has been released, withdrawn, or subordinated. A release indicates that the tax liability is paid in full, but a discharge means that the lien is removed with respect to certain property.

The “Fresh Start Program” allows for a lien to be withdrawn in specific circumstances:
1) You have an unpaid tax debt of less than $25,000.
2) You have entered into a Direct Debit Installment Agreement.

A Direct Debit Installment Agreement where you agree to allow the IRS to debit your bank account each month in order to pay off your tax debt.

Who qualifies for the Fresh Start Program?

You must meet certain requirements to qualify for the program, namely:

1) You owe less than $50,000
2) You agree to pay your tax liability off within 6 years
3) You must have filed your tax return for the previous three years
4) You must be current on any estimated tax payment for the current year
5) You must not have engaged in tax evasion or fraud.

However, even if you do not qualify for the program, many of the benefits are still available to you. Work with an experienced business lawyer in Baldwin County to determine what options are available for you.

Is it true that I can erase all or part of my tax debt with the Fresh Start Program?

No, the Fresh Start program does not erase any of your tax liability. In very limited circumstances, the IRS may accept an Offer in Compromise, which is an agreement with the IRS where you pay part of the tax liability you owe, and the IRS and the IRS write off the rest of the liability.

An Offer in Compromise may be accepted if it represents more than the IRS can reasonably expect to collect over a given time period. It is not guaranteed, and it will not be given when a taxpayer has sufficient assets to cover its tax liability. Moreover, it is likely that the IRS will be ramping up its enforcement in the coming years, having received an unprecedented 80 billion dollars from Congress, with which it is hiring 20,000 new people.

Taking Control of Your Tax Situation with Experienced Guidance

If you find yourself dealing with IRS letters, tax liens, or unresolved tax issues, it’s crucial to seek professional assistance. At The Law Offices of Brenton C. McWilliams, our experienced Baldwin County business attorney is here to help you explore the available options and navigate the IRS’s intricate processes. Don’t let tax issues overwhelm you; take the first step towards financial stability and peace of mind by reaching out to us today.

Contact us now to schedule a consultation and get the advice you need to address your IRS concerns effectively. Your financial well-being is our priority, and we are committed to helping you achieve a fresh start.