The burden of IRS debt can be daunting for small business owners. With the constant pressure to stay afloat, manage operations, and keep employees satisfied, dealing with back taxes can feel insurmountable. Fortunately, the IRS Fresh Start Program offers a viable solution. Many small business owners ask, “does irs have a fresh start program?” The answer is yes, and it provides a structured path to alleviate tax debt and regain financial stability. This comprehensive guide will explore top strategies for small businesses to manage IRS debt using the Fresh Start Program.
Understanding the IRS Fresh Start Program
The IRS Fresh Start Program, implemented in 2011, aims to assist taxpayers, including small business owners, in settling their tax debts. This initiative provides several measures that help find ways to repay taxes and avoid severe penalties. It also consists of new provisions such as more straightforward installment agreements, more accessible offers in compromise, and the removal of certain liens. Thus, by being aware of and applying these provisions, small businesses can identify an acceptable way to pay their tax dues.
Evaluate Your Credit and Equity
The total amount of the tax liability owed and current financial ability are essential before engaging in any installment agreement. To get the total amount that has to be paid, add all the current taxes, interest, and penalties. Look into your cash flow, income statements, and balance sheets to determine how much of your revenue you can set aside each month to pay for your debts without having to close down your business.
Apply for the Installment Agreement
Applying for a streamlined installment agreement is relatively simple. You can do this online through the IRS website, by phone, or by filling out form 9465. Ensure all your tax returns are in order and filed up to date, as the IRS needs this before granting any approval. As an extra precaution, paying the agreed monthly installments on time is recommended so you do not breach the contract and set off a default that will attract consequences and collection activities.
Maintain Financial Discipline
Exercising financial discipline to avoid accruing more debt while still on an installment plan is essential. You must develop a clear strategy to allocate money for monthly installment payments and adhere to it. Remit estimated taxes appropriately and control your business costs to avoid incurring more tax liabilities. Practical and sustainable financial management guarantees you will achieve the agreement’s goals and pay the tax bill.
Offers in Compromise
The second tool within the IRS Fresh Start Program is the offer in compromise (OIC) tool used to negotiate a lower settlement amount with the IRS. This option lets you clear your tax debt at a lower price than paying the total amount you owe, provided that paying the entire debt will severely strain your financial status. To utilize this strategy effectively:Â
Determine Eligibility
Any business needs to understand that not all of them will be accepted for an offer in compromise. The IRS will consider your capacity to make payments, your income, your expenditure, and the equity in your property. Fill in the IRS Pre-Qualifier Tool to determine whether you qualify for the application before you apply for it.
Prepare a Strong Application
OIC is often demanding, especially when the application is not well documented and articulated. It is important to collect all the financial statements, including income statements, expenses, assets, and other financial statements. Disclose your financial status truthfully and be totally upfront on all aspects. The following are the steps to be taken: You should submit Form 656 together with the $205 application fee and your initial payment. The offer can be paid in whole or in installments.
Negotiate Terms
The application you submit to the IRS will be considered carefully by the IRS once you have filled it. Be prepared to bargain, especially on issues related to your offer. Letters 1058 and 1059 are used to request additional information or propose a different compromise amount. Consult often with a tax professional to maintain a coherent and persuasive argument for why you should be able to negotiate the terms of your business’s tax situation.
Lifting of Liens
These documents can harm your business’s credit and loan chances. The IRS Fresh Start Program includes the facilitation of removing these liens. To take advantage of this:
Pay Down Debt
One way to remove a lien is to bring your balance to less than $25,000. To reduce your debt to this level, you should make single-shot payments to clear the balance, enabling you to qualify for lien withdrawal.
Request Lien Withdrawal
If you have made arrangements to pay off your debt and your balance is below $25,000, you can write to the IRS asking for a lien withdrawal using form 12277. This will enhance your credit score and afford you the best opportunity to access loans and essential credit facilities for it or run your business.
Conclusion
Dealing with the IRS is often difficult, especially for small businesses and organizations. Still, the IRS Fresh Start Program offers a few approaches to making this journey less stressful. With knowledge of the program measures, applying for IA, using OIC, and trying to remove levies, small business people can get out of the hole.Â
So, if you want your business to grow and be stable in the long run, it is always important to remain proactive and adhere to a sound fiscal work ethic when dealing with tax liabilities and other related issues. If you are still struggling with the IRS and its debt collection process, consider the Fresh Start Program as a possible solution to help you escape the mess.
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