North Carolina State Tax Payment Plan Overview

If a taxpayer owes back taxes to the State of North Carolina, they can set up its version of a tax payment plan. NC’s Department of Revenue (DOR) calls it an Installment Payment Agreement. An Installment Payment Agreement allows a taxpayer to pay off their taxes (including accrued penalties and interest) over a series of monthly payments.  Moreover, the state will not let a taxpayer set up an Installment Payment Agreement until it sends the taxpayer an official notice. Consequently, once the taxpayer has received a tax notice, they can consider requesting an Installment Payment Agreement to avoid enforced collection action.

If you have received a notice from the state, you can request a payment agreement based on the following parameters:

North Carolina Tax Payment Plan Details

Tax Type	Tax Owed	Months
Individual Income	Less Than $1,000	15
Individual Income	$1,000 to $6,999	30
Individual Income	$7,000 to $49,999	40
Individual Income	$50,000 or more	50
Business	Any Amount	12

Applying for an NC Payment Plan

A taxpayer can request an Installment Payment Agreement by filling out a form online.  You can find the North Carolina Department of Revenue’s links to this Installment Payment Agreement form online now. In this case, there are no fees to apply for or to process your application for an installment payment plan.

Remember, taxpayers need to receive official notice from the N.C. Department of Revenue to request an Installment Payment Agreement. If they have not yet received one, they can make payments on the Department of Revenue’s website.

Individuals also have the option of calling 1-877-252-3252.

Other Documentation a Taxpayer May Need

If the taxpayer believes that they cannot make payments according to the parameters provided by the Department, the taxpayer may submit more information for review. In other words, the taxpayer needs to complete a form. Specifically, individuals should use the Collection Information Statement for Individuals (Form RO-1062), and Businesses should use Collection Information Statement for Business (Form RO-1063). Therefore, if you are submitting financial information to the NC Department of Revenue, you may want to receive help from a licensed tax professional.

Generally, when submitting these forms, a taxpayer must include three months of bank statements and supporting documentation for all income and expenses listed on the forms.

What Else Do I Need to Do to Apply for a Payment Plan?

To apply for an installment payment agreement, a taxpayer must:

• Continue to file and pay all tax returns in full during the entire term of the agreement
• Have a bank account
• Allow the Department to take automatic payments
• File and pay estimated income taxes
• Provide any additional information that the Department requests

Forms of Payment Accepted

An installment payment plan can only be paid by automatic electronic debit from a bank account. Consequently, you are required to have a Personal Checking, Personal Savings, Business Checking, or Business Savings account to set up a plan.

Reasons for Payment Plan Being Denied or Defaulted Automatically

Taxpayers can default on an installment payment agreement automatically or receive a denial if they:

• Fail to file and continue to pay all tax returns in full during the term of the agreement
• Do not have a bank account
• Fails to make a scheduled payment, or the payment is returned
• Do not pay current estimated income taxes
• Do not provide any requested information to the DOR

Potential Negative Consequences From Obtaining a Payment Plan

If you obtain an installment payment plan with the Department of Revenue and default on any of the terms, the Department must take legal action to force collection of the tax immediately.

Forced collection actions include:

• Garnishment and Attachment – An order that requires that money be withheld from a taxpayer’s bank accounts, wages, or other intangible property.
• Certificate of Tax Liability (CTL) – A CTL places a judgment on real or personal property that is held by a taxpayer. Moreover, a CTL is public information and must be resolved to obtain a clear title to a property.
• Jeopardy Assessment – The NC Department of Revenue may immediately assess and collect any tax the Department finds in jeopardy. Furthermore, when making a jeopardy collection, the Department may use any collection remedy in NC General Statutes § 105-242.
• Tax Warrant – A tax warrant is a request issued to a Sheriff to seize and sell any personal property owned by a taxpayer who has failed to pay taxes, penalties, interest, or fees that have been assessed by the NC Department of Revenue.

When in doubt, it is generally a good idea to work with a licensed tax professional that has resolved or has experience fixing tax problems with North Carolina's DOR, click the link or start your search below to see top-rated tax professionals. Sometimes other options, like an Offer in Compromise can be a better course of action if a taxpayer qualifies. 

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

New Jersey Closing Agreement Overview

The State of New Jersey does not have a formal “offer in compromise” agreement program like the Federal Government. What they do have is a program where the taxpayer can ask the Division to accept a “Closing Agreement.” In effect, a Closing Agreement is the same general idea as an offer in compromise (OIC). In other words, the taxpayer is asking the state to accept a lesser amount than their full delinquent tax liability. The arrangement will include the delinquent tax due, as well as, penalties, interest, and any collection fees that have accrued.

The Division only provides general guidance as to what specific criteria a taxpayer must meet to qualify. New Jersey law gives the Division full discretion to accept Closing Agreements. The guidance reads as follows:

“[F]or any case in which there appears to be an advantage in having the case permanently and conclusively closed, or if good and sufficient reasons are shown by the taxpayer for desiring a closing agreement and it is determined by the director that the state of New Jersey will sustain no disadvantage through consummation of such an agreement.”

The code section does not elaborate on specific criteria or processes that must be, or should be, implemented to determine when resolving taxes owed would be an advantage to the State of New Jersey.

Further, the Division does not give guidance as to how it implements the above-stated law. However, they provide some detail as to general eligibility requirements, submission requirements, and financial documents needed. We discuss these items in more detail below.

Eligibility

The New Jersey Closing Agreement statute allows the Division to enter into Closing Agreements with taxpayers for any state tax administered by the Division for any taxable period ending before or after the date of the agreement.

Requirements

The following are the requirements for submitting a Closing Agreement Request:

• The taxpayer must complete and submit NJ Form 906 – Closing Agreement Request. This application can be found here: https://www.state.nj.us/treasury/taxation/pdf/other_forms/special_pro/906.pdf.

Required Documents

The following the Division needs the taxpayer to include with the submission of a Closing Agreement request:

• NJ Form 906 – Closing Agreement as to Final Determination Covering Specific Tax Matters.
• A copy of the taxpayer’s individual IRS tax returns and Corporate tax returns for the last two years (if applicable)
• A copy of filed Federal tax liens, if applicable.
• Copies of the most recent real estate mortgage statements with monthly payment amount and current balance due, if applicable.
• A copy of court-ordered judgments owed (other than federal and state), if applicable.
• Copies of monthly bills for food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous – if amounts exceed nationally allowed standards (discussed in more detail below).

Filing Process and Considerations

The State of New Jersey requires that the taxpayer submit the completed Closing Agreement in paper copy. Taxpayers should send their request and supporting documents to:

New Jersey Division of Taxation
Closing Agreements, 9th Floor,
PO Box 245, Trenton, NJ 08695-0245

Taxpayers should be aware that the submission of a Closing Agreement Request does not prevent the Division from filing a COD, tax refund offsets, or stay any enforced collection actions, including garnishments or foreclosures. Further, the filing of a Closing Agreement Request does not protect the taxpayer from otherwise making payments under a previously negotiated Installment Agreement.

Taxpayers should be aware that the Division reserves the right to use any information the taxpayer provides in the Closing Agreement Request for liability collection purposes.

Review and Determination

Once the Division has received the Closing Agreement Request and supporting materials, they will review it. The Division will accept, reject or counter-offer. It generally will make this determination and notify the taxpayer within 3-6 months.

The Division reviews the following financial information during the review of a Closing Agreement Request:

• Employment Information
• Spouse’s Employment Information (including non-liable spouses)
• Dependent Information
• Monthly Income and Expense Information
  • Taxpayers will be allowed the national standards for food, housekeeping supplies, apparel and services, personal care products and services, and miscellaneous, based on their family size, without question (a copy of the standards is attached to the NJ Form 906). If the monthly expense amounts exceed the national standards, the taxpayer must provide documentation to substantiate those expenses are necessary living expenses. Generally, the total number of persons allowed for family size are the same as those allowed as exemptions on the taxpayer’s most recently filed tax return.
• Assets
  • Cash, bank accounts, stocks, bonds and other securities, cash value life insurance, motor vehicles (owned and leased), liabilities owed to you, household furniture and goods, items used in a trade or business, real estate, and all other assets not already listed.
• Liabilities:
  • Bills owed, installment liabilities, federal taxes owed, state taxes owed, real estate mortgages, loans payable, judgments owed, and all other liabilities not already listed.

A Decision Within Three to Six Months

The Division will issue a notice to the taxpayer stating whether the Closing Agreement Request has been accepted, rejected, or a counter-offer proposed. Taxpayers will usually receive this notice within 3-6 months after the filing of their Request. The taxpayer does not have the right to appeal a denial of a Closing Agreement Request. However, they do have the ability to refile the application if their circumstances change. Furthermore, the tax liability will not be subject to audit, and the taxpayer cannot claim a refund.

Guidance

If you have a state tax problem with New Jersey's DOR, reach out to a licensed tax professional that has experience resolving NJ state tax problems, or start your search below. Realize that if you do not qualify for a closing agreement, NJ's DOT offers payment plans among other resolution options.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

State of NJ Options for Back Taxes

The State of New Jersey, Department of the Treasury, Division of Taxation (the “Division”) is responsible for all facets of the state’s tax administration.
It manages everything from assessment to tax collection. With that said, the Division has chosen to contract with a private company to assist with collecting delinquent taxes. Currently, the Division employs Pioneer Credit Recovery for this task. Once a taxpayer’s case is with Pioneer they must deal with them directly to reach a tax resolution.

Once the Division generates an assessment for taxes owed to the State of New Jersey, it will review the taxes owed and assign a caseworker to the account. The caseworker will then mail an initial contact letter which includes a schedule detailing the amounts owed. If a taxpayer does not respond to the initial contact letter, the caseworker will attempt to contact the taxpayer via telephone. If the taxes owed still has not been resolved, the Division will issue a Certificate of Liability (“COD”) with the Clerk of the New Jersey Superior Court.

For practical purposes, a COD is the New Jersey equivalent of a tax lien. If the Division issues a COD, the state will also begin to assess a Cost of Collection Fee. The collection fee becomes part of the liability owed. Further, the State of New Jersey adds penalties and interest to taxes owed. Moreover, it may add a Referral Cost Recovery Fee of 10.7% for cases sent to Pioneer Credit Recovery.

Contact the New Jersey Division of Taxation:

• Individual Taxes: 609-292-6400
• Business Taxes: 609-292-6400
• General Inquiries: 1-800-323-4400
• Collections: 1-866-372-6840
• Website: New Jersey Division of Taxation

NJ State Individual Tax Options

Taxpayers who owe back taxes to the State of New Jersey have three main options available to reach a tax resolution. These are:

• Installment Agreement (Payment Plan),
• Closing Agreement, and
• Penalty Abatement

An Installment Agreement is also known as a Payment Plan. It is a payment arrangement where the taxpayer makes a series of monthly payments to the Division until the taxpayer satisfies the past due tax liability. A Closing Agreement is a program similar to what the Federal Government and other states call an Offer in Compromise. Here, the taxpayer may offer to settle their delinquent tax liability for less than what the taxpayer owes. Finally, a request for Penalty Abatement is a written request asking for relief with tax penalties. In other words, the taxpayer asks the Division to waive some, or all, of the tax penalties it has assessed.

Statute of Limitations

Arguably, the first thing a taxpayer must consider before pursuing a resolution is to determine the taxpayer’s legal rights under New Jersey law concerning the statute of limitation rules for the collection of back taxes.

In New Jersey, the Division has six years from the date of the first assessment to file a COD with the New Jersey Superior Court against the taxpayer for the delinquent tax due. Additionally, the State Attorney General may bring an action against the taxpayer in New Jersey Superior Court for the recovery of taxes owed that has been assessed in the six years before the commencement date of the action. Finally, New Jersey law only requires that the COD be renewed by the Division every 20 years. Moreover, it also provides for no limitation on how long the Division may keep the COD issued. The only method for having a COD released by the Division is to satisfy the taxes fully.

Innocent Spouse

The Federal Government and most states have innocent or injured spouse programs. These programs provide tax relief for these taxpayers who otherwise are not responsible for their spouse’s taxes iwed. Unfortunately, the state of New Jersey is one state that does not provide this program. Taxpayers who believe they are not liable for taxes based on innocent spouse principles must timely challenge the assessment. Otherwise, they can make their case through the Closing Agreement Request process.

Alternative Options That May Be Available

Contest the Assessment

If the taxpayer has a proposed assessment for additional income tax due as a result of a State of New Jersey audit, they have the opportunity to appeal the proposed assessment. The taxpayer has three appeal options:

(1) protest and request an informal administrative conference with the Conference and Appeals Branch,

(2) file an appeal with the required fee to the Tax Court, or

(3) a taxpayer who paid the entire assessment within the one-year appeal period may file a refund claim after that.

The taxpayer may not resolve their tax situation with the Conference and Appeals Branch. If so, the taxpayer may appeal to the Tax Court. The Conference and Appeals Branch is an informal body, while the New Jersey Tax Court is an administrative, judicial body. While a taxpayer may represent oneself in New Jersey Tax Court, it is advised to hire a licensed attorney who has experience practicing in the Tax Court.

Bankruptcy

Bankruptcy can be expensive. Therefore, this option is generally feasible for taxpayers who have personal liabilities in addition to their unpaid tax liabilities. Some taxpayers can discharge state taxes owed through bankruptcy proceedings. Taxpayers should contact an experienced bankruptcy attorney if they want to pursue this option.

The New Jersey Tax Amnesty Program

The State of New Jersey has conducted numerous tax amnesty programs. Currently, there are no active programs. The state did run a program in the past that ended January 15, 2019. This program was available for individuals and businesses with taxes owed. The Amnesty Program encourages delinquent taxpayers to become current. The state will waive penalties, and cut interest for those who file and fully pay their taxes owed. It is a program that most delinquent taxpayers should pursue.

Appeal Rights

As discussed herein, New Jersey law does not provide taxpayers with the right to appeal determinations of the Division concerning the collection of taxes owed. However, there are a couple of practical tips that the taxpayer, or their representative, should follow.

First, do not be afraid to escalate contentious issues to a manager within the Division. Often, a fresh set of eyes and the authority and experience of a supervisor can help resolve the matter amicably.

Second, if you believe that your case manager is not following New Jersey law, or discriminating against you, file a request for assistance with the Office of the Taxpayer Advocate (OTA). OTA helps taxpayers end their tax problems by:

• Helping taxpayers who are experiencing “undue hardship” as a result of Division actions;
• Working with taxpayers whose problems fall within the Division’s jurisdiction; and
• “Identifying systemic challenges within the Division that increase the burden on, or create certain issues for taxpayers. When appropriate, OTA will recommend administrative or legislative solutions.”

You can find more information about this on the Office of the Taxpayer Advocate website.

Certificate of Liability (COD)/Lien Releases

The Division will only release a COD in different situations. First, if the taxes owed, including any penalties, interest, and collection fees, has been paid in full. Second, it may release a COD if the taxes owed is satisfied through a Closing Agreement or Penalty Abatement.

Conclusion

Taxpayers have many tools at their disposal when dealing with back taxes in the State of New Jersey. With that said, New Jersey has a statute of limitations to hold open filed CODs. Additionally, the penalty, interest, and collection fees system results in reasonable taxes owed ballooning into crippling liabilities. Therefore, taxpayers should consult with a qualified tax professional as soon as these problems arise to determine which course of action is most appropriate for their situation. You can also find the top-rated professionals by license type below.

• New Jersey Enrolled Agents
•  New Jersey CPAs
• New Jersey Tax Attorneys

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

Ohio State Tax Penalty Abatement & Common Penalties

A request for penalty abatement is a written request asking the state to waive some, or all, of the penalties that have been assessed.

Ohio law permits the Department of Taxation (DOT) to abate penalties. Usually, the DOT permits it if the failure to comply with the provisions of the tax code were due to reasonable cause and not willful neglect. However, there is no published guidance as to what the State of Ohio considers “reasonable cause and not willful neglect.”

Some examples provided by the IRS are the death of a family member, incapacitation of the taxpayer, unavoidable absences, fires, floods, natural disasters, or other like situations resulting in circumstances beyond the taxpayer’s control. However, a taxpayer must pay the underlying tax due before the Department of Taxation will consider a penalty abatement request.

AG Address for Penalty Abatement Requests

A taxpayer, after paying the underlying tax, should submit a request for abatement in writing to the Attorney General’s office. Moreover, include any supporting documentation that may be relevant. The current address for submission of penalty abatement requests is:

Ohio Attorney General Collections Enforcement Division
150 E. Gay Street, 21st Floor
Columbus, Ohio 43215

The Attorney General’s office will forward the request to the Department of Taxation. Consequently, the Department of Taxation will make a determination, usually within 60 days. The Department may abate all, some or none of the penalty. Nevertheless, the taxpayer cannot appeal penalty abatement request determinations. However, they may refile the request if circumstances change.

Penalties and Interest

With respect to taxes owed, there are 2 penalties that a taxpayer should know. First, taxpayers should know the failure to file penalty. The state will assess the failure to file penalty when a taxpayer fails to file a tax return by the due date, including extensions. The failure to file penalty is the greater of $50 per month, but not exceeding $500, or 5% per month, but not exceeding 50% of the total tax that is due. This penalty will be assessed for each month, or fraction of a month, that the tax return is late.

The second is the failure to pay penalty. The failure to pay penalty is determined by the tax commissioner. Pursuant to Ohio law, it may not exceed twice the amount of the federal short-term interest rate. Currently, that rate is 4% per annum.

Additionally, interest is applied for each month that a delinquent tax goes unpaid, not to exceed the federal short-term interest rate, which as previously stated, is currently 4% per annum (Nov 2018).

As one can see, the penalty for a taxpayer failing to file their income tax return on time (the first penalty) is very steep. Therefore, even if a taxpayer is unable to pay the tax due they should strive to file their income tax return on time in order to avoid the failure to file penalty. Penalties can make the balance due grow very quickly, and if the Department of Taxation files a tax lien against you, the value of the lien will include the original tax debt as well as any associated penalties and interest.

It is highly recommended you work with a licensed tax professional that has experience resolving Ohio state tax problems. Click the link or start your search below.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional.

Ohio Offer In Compromise: Eligibility, Requirements, & Process

The State of Ohio has established a formal Offer in Compromise program to allow some taxpayers to settle their taxes owed for less than the amount they owe. The settlement will include not only delinquent tax due but also penalties, interest, and any collection fees that may have accrued. The program is administered by the Attorney General’s office, with the consent of the Department of Taxation. The program has specific requirements that a taxpayer must meet to qualify.

Qualifying Circumstances for an Ohio Offer In Compromise

The program allows taxpayers the opportunity to settle their taxes owed under three circumstances:

(1) economic hardship

(2) doubt as to liability, or

(3) in limited instances, a substantial probability that the claim, if collected, would be subject to refund under the respective agencies’ statutes, rules or regulations. The State of Ohio processes innocent spouse relief under the economic hardship Offer in Compromise program as well.

The Attorney General’s office only provides general guidance as to what specific criteria a taxpayer must meet to qualify for each of the three types of acceptable Offers in Compromise. They define an “economic hardship” as, “having insufficient assets and income to pay the full amount and that requiring full payment would cause a severe economic hardship.” They do not elaborate on how they view or calculate a severe economic hardship. Further, they define having “doubt as to liability” as, “the taxpayer having a belief that they do not owe the amount and/or did not receive service of the assessments.”

The guidance that the Attorney General’s office does provide is general eligibility requirements, submission requirements, and a list of financial documents that they require to be submitted. We discuss these items in more detail below.

Eligibility

For a taxpayer to be eligible for an Offer in Compromise, the following must be true:

• Taxes owed must have been certified for collection to the Attorney General’s office for greater than one year
• The principal must be greater than $500 (except for innocent spouse)
• The taxpayer must not currently be in bankruptcy or have an administrative appeal pending with the Department of Taxation

Requirements

The following are the requirements for submitting an Offer in Compromise:

• The taxpayer must complete and submit an Offer-in-Compromise application. Taxpayers can request it by contacting the OIC Unit at 614-779-0105
• The taxpayer must be current with all tax return filing and estimated payment requirements
• The taxpayer must sign the Offer-in-Compromise application, agreeing to all terms and conditions stated therein. Specifically:
  • Disclosure of every obligation owed to the State of Ohio
  • Payment of the proposed settlement amount, in full, within 60 days of execution of the Offer-in-Compromise agreement
• The taxpayer must agree to remain in continued compliance with all filing and estimated payment requirements for five years after the acceptance of the Offer-in-Compromise agreement. Failure to comply with this requirement will result in the reinstatement of the original delinquent taxes, including accrued interest.
• The state requires full financial disclosure. A failure to fully and completely disclose and attach any information required by the Offer-in-Compromise Application may result in outright rejection or, if previously accepted, reinstatement of the full amount owed plus accrued interest.
• Also, the Attorney General’s office encourages applicants to submit all relevant information or documents that pertain to their specific situation, even if the Offer-in-Compromise Application does not explicitly request it.

Required Documents

The following is a list of documents that the State of Ohio requires to be included with the submission of an Offer-in-Compromise:

Copies of IRS OIC Documents and Tax Returns

• Copies of all Offer in Compromise forms and supporting documents submitted to the Internal Revenue Service, if applicable; including, all related notices received from the Internal Revenue Service
• Copies of the last two years’ Federal income tax returns, including all W-2’s, 1099’s, schedules and attachments
• Copies of the last two years’ State income tax returns including all W-2’s, 1099’s, schedules and attachments

Financial Documents

• A credit report dated within the past year
• Copies of the last three months’ pay stubs or proof of income
• Copies of the last three months’ complete bank statements. This includes all open accounts at all banks, credit unions, and all other financial institutions
• Copies of the last three months’ complete credit card statements for any and all open credit cards
• Copies of all insurance policies and/or most recent renewal declaration pages, including homeowners, renters, automobile, etc.
• If applicable, a copy of an official statement of social security or other government benefits received
• If applicable, list any bankruptcy cases filed and attach copies of the discharge document

Other Financial & Miscellaneous Documents

• Applicant’s monthly budget including a list of all monthly income and a list of all monthly living expenses
  • Provide copies of the current month’s bills for all budget items listed including lease agreements, mortgage statements, utility bills, car payments, etc.
• List of assets with copies of the last three months’ investment statements including IRA’s, 401k’s, stocks, bonds, etc.
• List of any other liability that is currently in collections, i.e. medical bills, credit cards, payday loans, utilities, etc.
  • Documentation, if applicable, showing payment on the above liabilities
• Provide documentation and list any collection proceedings that have been filed against the applicant, including, but not limited to wage or bank garnishments
• List all civil or criminal cases, including court and case number, in which the applicant is a party
• List any professional licenses from any and all state or federal agencies
  • Please specify if any of these licenses are impaired because of the applicant’s liability, or for any other reason

Filing Process and Considerations

The State of Ohio requires that the Offer in Compromise Application be submitted in paper copy only. Taxpayers should submit their application and supporting documents to the Office of the Attorney General, OIC Unit, 150 E. Gay Street, 21st Floor, Columbus, Ohio 43215.

Taxpayers should be aware that the submission of an Offer in Compromise Application does not prevent the Attorney General’s office from filing tax liens, tax refund offsets, or stay any pending enforced collection actions, including garnishments or foreclosures. However, the Attorney General’s office will not undertake any new enforced collection actions. Further, the filing of an Offer in Compromise application does not protect the taxpayer from otherwise making payments pursuant to a previously negotiated installment agreement.

Taxpayers should be aware that the Attorney General’s office reserves the right to use any information that is provided in the Offer in Compromise application for tax collection purposes.

Review and Determination

Preliminary Review At First

Once the Attorney General’s office has received the Offer in Compromise Application and supporting materials from the taxpayer they will conduct a preliminary review to ensure that all eligibility requirements, submission requirements and required supporting documentation have been met or included. If the application is incomplete, or if the taxpayer does not meet the eligibility or submission requirements, the application will be rejected without review. If particular documents do not exist, the taxpayer may submit the application with a notarized statement explaining why the records do not exist. The Attorney General’s office will base its recommendation on the information provided, however, the Department of Taxation may investigate further.

Official Review

Next, the Attorney General’s office will perform a review of the application and issue a recommendation of acceptance, rejection or counter-offer. This, along with the application, is sent to the Department of Taxation for review. The Department of Taxation will also perform a review of the application and ultimately issue an acceptance, rejection or counter-offer.

What the AG and Department of Taxation Consider

The Attorney General’s Office and the Department of Taxation have stated they will consider all of the following the review of an Offer in Compromise application:

• Earning potential, current employment, and future employment/income
• All sources of income, past, present, and future
• Applicant’s age with respect to earning potential
• Borrowing potential
• Assets
• Dependents
• Litigation, including tax litigation
• AG collection notes
• IRS and other state and local tax returns
• IRS or other states Offers in Compromise
• Whether the applicant has made a good faith attempt to pay the liability prior to submitting the Offer in Compromise application
• Whether the offer is sincere (rejections and counteroffers are not negotiable)
• Does the applicant have a history of tax compliance? The AG and Department of Taxation will generally reject outright any applicants who cannot demonstrate that they have filed and paid their taxes timely for at least two years.
• In cases of an active business applicant, the fairness to competitors

They further advise that, “[i]t is the burden of the applicant to prove each basis for the request for relief. If the applicant believes a specific issue should be considered, such as an ongoing medical condition or pending legal proceeding, documentary evidence in support of that issue, such as medical records and/or pleadings, must be submitted along with the application. Do not rely on the State to request information.”

The AG Will Issue A Decision in 3-6 Months

The Attorney General’s office will issue a notice to the taxpayer stating whether the Offer in Compromise Application has been accepted, rejected, or a counter-offer proposed. Taxpayers will usually receive this notice within 3-6 months after the filing of their Offer-in-Compromise. The taxpayer does not have the right to appeal a denial of an Offer-in-Compromise. However, they do have the ability to refile the application if their circumstances change.

As always, it is a great idea to work with a licensed tax professional when considering an Offer in Compromise.  Click the link to see professionals with experience doing Offer in Compromise with Ohio, or start your search below.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

Ohio State Back Taxes Options or Resolutions

The State of Ohio has a multi-faceted approach for dealing with unpaid income tax or Ohio state back taxes. The Department of Taxation is responsible for the collection and administration of the Ohio tax code. However, the Attorney General’s office is responsible for collections enforcement. Further, the Attorney General’s office employs private collection firms, called “special counsel,” who perform most of their collection activities. The AG’s office gives private collection firms the full power of the Attorney General while handling their collection matters.

Ohio State Individual Tax Options

Taxpayers who owe back income taxes to the State of Ohio have three or four main resolution options. These options are available for taxpayers to reach a reasonable resolution to their delinquent tax liability. These are:

Installment Agreement (Payment Plan)

An Installment Agreement is also known as a payment plan. It is an arrangement where the taxpayer reaches an agreement with the State of Ohio to make monthly tax payments. The taxpayer makes payments until they satisfy their past-due tax liability. You can read more about Ohio State tax payment plans here.

Offer in Compromise (OIC)

An Offer in Compromise is a program where a taxpayer may offer to settle their delinquent tax liability. Generally, the taxpayer pays less than the amount owed. In Ohio, the state may grant an Offer in Compromise for Economic Hardship, including innocent spouse relief, and Doubt as to Liability. In limited instances, the state may approve an OIC if a substantial probability that the claim, if collected, would be subject to refund under the Department of Taxation’s statutes, rules or regulations. Find out more information here.

Penalty Abatement

A request for Penalty Abatement is a written request asking the State to waive some, or all, of the tax penalties assessed. Just like the IRS, the state permits taxpayers sometimes to reduce specific tax penalties.  You can read more about it here.

Innocent Spouse Relief

Under Ohio law, if there is a joint assessment of spouses for personal income tax and one of the spouses has been granted relief from the joint assessment under I.R.C. § 6015, there is a rebuttable presumption that this spouse is entitled to similar relief for any Ohio assessment of the same liability. The spouse must complete an Offer in Compromise application. Furthermore, they must include all correspondence with the IRS related to the innocent spouse relief. Moreover, this includes all tax returns, including all attachments, for the tax years in question.

Ohio will still consider innocent spouse relief for those who have not received similar tax relief from the IRS. However, the taxpayer must seek that relief by filing an Offer in Compromise Application under Doubt as to Liability circumstances.

Alternative Options That May Be Available

Challenge the Assessment

If the taxpayer has a proposed assessment for additional income tax due as a result of an Ohio Department of Taxation audit, they have the opportunity to appeal the proposed assessment. The taxpayer may first appeal to the Department of Taxation Appeals Office. Therefore, an informal hearing will be conducted, usually via telephone, with a tax attorney from the Department of Taxation.

If the taxpayer cannot resolve the tax issue with the Department of Taxation Appeals Office, the taxpayer may appeal to the Board of Tax Appeals. The Board of Tax Appeals is an administrative, judicial body that works in a formal, courtroom-type manner. A taxpayer may represent themselves in front of the Board of Tax Appeals. However, a taxpayer should hire a licensed attorney who has experience practicing in front of the Board of Tax Appeals.

The Attorney General’s office represents the Department of Taxation for cases in front of the Board of Tax Appeals. The taxpayer will have the opportunity to settle with the Attorney General’s office attorney. However, if the taxpayer cannot resolve the tax issue with the AG, the taxpayer will proceed for a hearing in front of the Board. The Board will then issue a ruling based on the evidence presented. The Board will apply Ohio law to the facts of the case. Fortunately, taxpayers can appeal the decisions of the Board of Tax Appeals to the Ohio Appellate Courts.

Bankruptcy

Bankruptcy can be a costly endeavor. Therefore, this option is likely only practical for taxpayers who have significant personal liability in addition to their delinquent taxes owed. Generally, taxpayers may discharge state taxes through bankruptcy proceedings. Taxpayers should seek the advice of an experienced bankruptcy attorney before pursuing this option.

The Ohio Tax Amnesty Program

From January 1, 2018, through February 15, 2018, the Department of Taxation had a “Tax Amnesty Program.” The program was available for individuals and businesses with unreported or underreported income. As a result, if these taxpayers enrolled in the program, the Department of Taxation would waive all penalties and only assess half interest if the taxpayers filed, or corrected, their returns and paid the entire tax due. The state does not currently offer this program. However, if the State decides to reopen the Program, delinquent filers should take advantage.

Appeal Rights

As discussed herein, Ohio law does not provide taxpayers with the right to appeal determinations of the Attorney General or Department of Taxation concerning the collection of taxes owed. However, there are a couple of practical tips that the taxpayer, or their representative, should follow in an attempt to reach a reasonable resolution.

First, do not be afraid to escalate contentious issues to a manager at the Attorney General’s office or the Department of Taxation. Often, a fresh set of eyes and the authority and experience of a supervisor can help resolve some issues.

Second, if you believe that your case manager is not following Ohio law, or discriminating against you, file a request for an investigation. Do this in writing, with the Department of Taxation Problem Resolution Office. The Problem Resolution Office serves as a liaison between the Department of Taxation and taxpayers when the usual lines of communication break down or when a problem remains after attempts to solve it through designated channels have failed. 

The Attorney General’s office will release tax liens only after the taxes owed, including any penalties, interest or collection fees, have been paid in full or satisfied through an Offer in Compromise Agreement (which is similar to the IRS policy on releasing tax liens). The Attorney General’s office will forward to the taxpayer a certificate of release for the tax lien in question. The taxpayer must file this certificate of release with the court where the tax lien is filed to release it officially. Taxpayers often overlook or misunderstand this.

Statute of Limitations

The first factor to review before considering a possible resolution is to determine the taxpayer’s legal rights under Ohio law concerning the statute of limitation rules for the collection of taxes owed.

In Ohio, the Attorney General’s office may file a tax lien against the taxpayer in their residential county. It is generally filed for any taxes owed that has been certified to them by the Department of Taxation. The AG’s office has seven years from the date of the original tax assessment to begin legal proceedings to collect the taxes. This is different from the IRS. These proceedings include garnishment of bank accounts, garnishment of wages, and garnishment of certain retirement or investment accounts. It can also include foreclosures or conducting a debtor’s examination through the Court. If the AG’s office fails to begin proceedings to collect the taxes owed within the seven years, they are time-barred from ever being able to use these enforced collection methods.

Unfortunately, this does not affect the status of any tax lien filings. Under Ohio law, tax lien filings have a separate statute of limitations. This limitation only requires the State to refile the lien every 15 years. Furthermore, they may keep the tax lien active for up to 40 years. Therefore, even if the State may be time-barred from conducting an enforced collection of a delinquent taxpayer, they may still keep the tax lien on the taxpayer’s property for up to 40 years. Naturally, this creates an undesirable position for many taxpayers. The taxpayer may still need to resolve the situation with the State despite the fact they are protected by statute from garnishments, foreclosures, and other enforced collection measures.

Consequences of Unpaid Ohio Taxes

If you don't file or pay your Ohio state taxes, the Department of Taxation can certify your tax debt to the Secretary of State. At that point, the Secretary of State or the collection agency assigned to your account can initiate several types of collection actions against you. Here's what happens if you don't pay or file. 

Ohio Department of Taxation Contact Information

• For Individual Tax Matters: (800) 282-1780
• For Business Tax Matters: (888) 405-4039
• General Inquiries: (800) 282-1780
• Collections: 877-607-6400
• Visit the Ohio Department of Taxation Website: https://tax.ohio.gov/

Penalties and Interest

The state can assess a failure-to-file penalty of 5% of the tax due or a minimum of $50. This penalty applies monthly for up to 10 months, meaning that it can reach up to half of your tax bill or $500 whichever is larger. Ohio also charges interest on unpaid taxes. The interest rate for most state taxes is the federal prime rate from July of the previous calendar year plus three points. 

Tax Liens

The Secretary of State can issue a tax lien against you for unpaid taxes. A tax lien is a legal claim to your assets. It exists as a public record, and if you sell assets or apply for loans, the buyer or lender will know that a lien is in place. As indicated above, as long as the tax lien gets filed before the statute of limitations expires on your tax debt, it lasts for 15 years. It can also be renewed so that it lasts for up to 40 years.  

To give you an example, imagine that you sell a car for $20,000. You owe $5,000 on a car loan and you have an Ohio tax lien for $10,000. The proceeds of the sale will satisfy the car loan and the tax lien, and you will get the remaining amount. Alternatively, imagine that you try to take out a home equity line of credit but the lender sees that you have a tax lien against you so they deny your application.

Wage Garnishments

The state can also garnish your wages if you have unpaid taxes. If this happens, the state will send a notice to your employer about your delinquent taxes. Your employer will then withhold some of your pay and send it to the state to cover your tax bill. This can be very embarrassing and financially stressful.

Depending on the situation, the state may also seize your assets or take the funds from your bank account. To avoid collection actions, you should try to resolve your state tax debt as soon as you can. It's always better to contact the state and proactively make arrangements than it is to wait for the state to take action against you. 

Conclusion

In conclusion, taxpayers have many tools at their disposal when dealing with tax liabilities with the State of Ohio. With that said, Ohio has a very government-friendly statute of limitations to conducting enforced collection. Additionally, the penalty, interest, and collection fees system results in reasonable taxes ballooning into crippling liabilities. Therefore, taxpayers should consult with a qualified tax professional as soon as these problems arise. A tax professional can help determine which course of action is most appropriate for their situation. Click the aforementioned link or start your search below to find the tax professional that best fits your needs.

Disclaimer: This article is not legal or tax advice. This article should not be used as a substitute for the advice of a competent attorney or tax professional admitted or authorized to practice in your jurisdiction.

Guide to Completing IRS Form 14039 Identity Theft Affidavit

You can file IRS Form 14039, Identity Theft Affidavit when someone else uses your Social Security Number (SSN) to file a tax return. To alert the IRS that your identity has been stolen, you file this form. The IRS will refer your account to an identity theft specialist for evaluation.

When to File the IRS Identity Theft Affidavit

The IRS catches many cases of tax-related identity theft before they cause problems. Suspicious returns may be flagged or rejected. The IRS may ask you to verify your identity before these returns are accepted by sending you Notice CP5071C, Letter 4883C, or a similar letter, and in that situation, you won’t need to file Form 14039 in these cases unless you are told to by the IRS.

Some taxpayers discover that someone stole their SSN when they attempt to e-file their tax return. If the IRS rejects the return because the SSN has been used on a tax return for the same tax year, it could be due to identity theft. Be sure you don’t have any typos or other problems before filing IRS form 14039 that caused the IRS to reject the return.

There are three main situations where you should file Form 14039:

1. Someone else files a return using your SSN that is accepted, so you can’t file your return using E-file. You can also file this form on behalf of another person if they are your dependent or if you have been appointed as guardian, conservator, or power of attorney.
2. An IRS notice or letter instructs you to file Form 14039. Check Box 2 in Section A and include the notice number.
3. You are a victim of identity theft that is unrelated to a tax return, but you want to alert the IRS that someone else may have your personal information.

How to Complete and Submit Form 14039

Explain your issue and how you discovered that your identity had been stolen in Section B. Attach any supporting documentation, such as a notice you received from the IRS, and submit it along with the form.

You can’t electronically file the IRS Identity Theft Affidavit. You will need to submit the form by mail or fax.

Where you send the form depends on your reason for filing. You should only send the form using one method—don’t send Form 14039 by both fax and mail.

Follow these instructions when submitting the form:

1. When filing Form 14039 in response to an IRS notice, you can fax the document if the IRS notice includes a fax number. If not, mail the form to the address listed on the IRS notice.
2. If you are a victim of identity theft, but no have current tax-related issues, you can use the fax number or the address listed on page 2 of Form 14039.
3. When you are filing Form 14039 because someone else used your SSN or your dependent’s SSN to file a return, attach the Identity Theft Affidavit to your tax return and send it to the address where you normally file your tax return. If you already mailed your paper tax return, you can send Form 14039 on its own to the same address. Visit the IRS “Where to File” page to find the address you should use when submitting your tax return.

What Happens After You Submit the Identity Theft Affidavit

You should receive an acknowledgment letter from the IRS after they receive your Identity Theft Affidavit. The IRS will refer your case to the Identity Theft Victim Assistance (IDTVA) organization for processing.

The IDTVA will investigate your case to determine if any other fraudulent returns have been filed using your information. They will work to have any fraudulent returns removed from your account and to process your correct return and release your tax refund.

IDTVA attempts to resolve cases within 120 days, but complex cases can take up to 180 days. The IRS sends a notification when they settle your case.

The IRS may also give you an Identity Protection Pin— a six-digit number you use to confirm your identity when filing your return. The Identity Protection Pin can help prevent cases of tax-related identity theft on future returns.

Help With IRS Identity Theft

At TaxCure, we have a large network of tax professionals from around the country. Not all tax professionals can help with IRS Identity theft, our system allows you to filter by the top professionals that do have experience with submitting IRS form 14039 and resolving issues from tax identity theft. You can start your search here which lists the top professionals with IRS tax identity theft experience. We are dedicated to making it easier for taxpayers to find professionals to help them with their unique tax situations.

Why & How to Apply for a Discharge of an IRS Tax Lien

IRS tax liens attach to all of your current and future property and your rights to property. To get the lien removed from a specific piece of property, you must request a discharge from the IRS. You can do so by filing Form 14135. For example, taxpayers often request a discharge if they want to sell a specific property so that they can pay their taxes. Read on to learn more, or use TaxCure to find a tax pro in your area today.

Key takeaways

• Lien discharge — When the IRS removes a tax lien from a specific piece of property.
• When to use — When the property has no value, you have double the lien value in other property, or you plan to sell and put the funds in escrow to pay the IRS.
• How to apply — File Form 14135 and note why you want the discharge.
• Tips for success – Work with a tax pro who has experience with IRS tax liens.
• Other options — Consider lien subordination, setting up payments to get a lien withdrawn, or other options based on your situation.

What is a Discharge When it Comes to IRS Tax Liens?

The discharge of an IRS tax lien removes the lien from a specific piece of property. If you apply for a lien discharge and the IRS grants your request, you can sell or refinance the property named in your Certificate of Discharge. Typically, the IRS will only approve a request for a discharge if doing so will help you pay your back taxes, or if it's otherwise in the best interest of the government. You can apply for a discharge related to either personal or business tax liens.

 

What Happens When the IRS Discharges a Tax Lien?

You will receive a Certificate of Discharge that removes the IRS tax lien from your property, but the discharge only applies to the property named in the certificate. Once the lien is discharged, you can now use that property as you like, but be aware that your options may be limited by the terms you agreed to when you requested the discharge.

If you receive a lien discharge:

• You will still owe your back taxes to the IRS, including any penalties and interest.
• The IRS tax lien will still cover all property other than the asset(s) named explicitly in the lien discharge certificate.

Pro Tip: “The most misunderstood part of a lien discharge is its limited effect — it only applies to specific property, leaving the lien in place on other assets. It also doesn’t remove the NFTL from public records, which means it may still affect credit.” – Felecia Dixson, EA, CTRC

How to Request a Discharge of an IRS Tax Lien

To apply for a discharge, file Form 14135, Application for Certificate of Discharge of Property from Federal Tax Lien at least 45 days before the sale or settlement meeting.  Publication 783 provides the instructions for completing Form 14135, but here is a quick overview of how to complete this form:

1. Taxpayer information — Note tax ID number, address, and contact details.
2. Applicant information — Check the box if the taxpayer is the applicant; Otherwise, complete this section if a third party is applying for the lien discharge.
3. Purchaser, transferee, or new owner — Tick the box if the applicant is also this person; If not, complete the details requested.
4. Attorney/representative — Complete if applicable, and attach Form 2848 (Power of Attorney)
5. Lender, finance company, settlement company, or escrow company — Fill out as relevant based on your situation. For example, if you're borrowing money against the asset, list the lender. If you're selling the asset and the proceeds are going into escrow, check with the escrow company.
6. Monetary info — Here, you should list the proposed selling price and any funds that will go to the IRS, even if it's 0. 
7. Basis for discharge — Choose one of the four items on the list; check out the section below for more details on when to use each of these options.
8. Description of the property — Write a description of the property. Then, list the property address if applicable, and if relevant to your request, include a list of all of the remaining property that the lien is attached to. 
9. Appraisal and evaluations — Generally, you need to attach two appraisals: one completed by a professional uninterested party and another one, such as a county evaluation, an informal appraisal from a disinterested party, or a related option. Note which type of appraisal you've attached.
10. Copy of the federal tax lien — Note details like the lien serial number and attach a copy of the notice of federal tax lien if possible. 
11. Copy of the sales contract or purchase agreement — List these details and attach supporting documents if required.
12. Copy of a current title report — Attach the title report and create a list of all liens or other encumbrances attached to the property.
13. Copy of proposed closing statement — If selling the property, attach the proposed closing statement.
14. Additional information — Note whether or not you've attached additional information. For example, if you're dealing with litigation related to this asset.
15. Escrow agreement – If you're requesting a discharge because the funds are going into escrow, you should note that and attach the agreement. 
16. Waiver — If you're a third party, you may waive your right to put up a bond if you're applying for a discharge based on other factors. However, if you're applying for a discharge based on paying a bond, you should not include this waiver. Consult with a tax professional before waiving any of your rights. 
17. Declaration — Sign, date, and you're done.

Reasons the IRS Will Grant a Tax Lien Discharge

As stated above, the IRS will approve the discharge of a tax lien on a specific piece of property or properties with good reason. When you complete section 7 of Form 14135, you must note the reason for the discharge. Here are the options along with their associated statute numbers:

• Your other property subject to the IRS tax lien is worth twice as much as your tax liability (6325(b)(1)). For example, if the IRS tax lien is $45,000, you will need to have at least $90,000 worth of assets subject to the Federal tax lien after the IRS grants the lien discharge for the requested property. If you have debt against these same assets, your equity must be double the secured debt plus your tax debt. To illustrate, imagine that you owe $100,000 on your mortgage, $20,000 on your car loan, and $30,000 on an IRS tax lien. The total of these debts is $150,000, so you must have $300,000 to get the lien discharged under this option. 

• You pay the IRS an amount equal to the IRS's lien interest in the property being discharged. (6325(b)(2)(A)) If you pay the IRS the same amount they could receive from their lien interest, they may give you a lien discharge. The IRS interest may be less than the full value of your property because other creditors, such as a mortgage lender, may have interests that are superior to the IRS tax lien. 

• You establish that the IRS tax lien interest in your property is worthless. (6325(b)(2)(B)) The IRS may discharge a lien if it doesn’t attach to any value. It can occur if you owe more to your mortgage lender than what your home is worth. The mortgage lender’s interest is superior to the IRS tax lien, so the government’s interest in your property has no value.

• You agree to sell your property and hold the funds subject to the IRS tax lien in escrow. (6325(b)(3)) You can use the sales proceeds to pay off a creditor with a superior interest to the IRS. In many cases, this could be a mortgage lender. But the rest of the funds have to stay in escrow, subject to the IRS tax lien.

• A third party provides a deposit or bond equal to the IRS lien interest in the property. (6325(b)(4)) If a third party owns property subject to your IRS tax lien, they can get a lien discharge by paying a deposit to the IRS. Then, the third party has to file an action in district court challenging the lien interest within 120 days, or they forfeit the deposit.

Why Would a Taxpayer Want to Discharge a Tax Lien?

A discharge can allow you to sell, transfer, or borrow against your property so that you can more easily pay your tax debt. It is very hard and often impossible to do any of those things when there is a lien attached to your property. A tax lien gives the IRS an interest in your property that can be used against your other creditors or someone who buys your property. A potential purchaser won’t want to buy your property as long as the lien is in place, and they will not be able to get a loan to buy the property. Additionally, it's nearly impossible to get loans against property that's encumbered by IRS tax liens, because lenders cannot effectively use an asset as collateral if the IRS already has a lien against it.

Alternatives to Lien Discharge

A lien discharge is not the only way to deal with a tax lien. Depending on the situation and your goals, you may want to consider the following options:

• Pay the tax debt in full – In most cases, this is not an option for taxpayers at this point, but if you can come up with the funds, paying in full releases the tax lien from all of your assets.
• Appeal the lien — If the lien was issued in error or if it's harming you financially, you can appeal. Generally, you have 30 days after you receive the Notice of Federal Tax Lien to request a CDP hearing, but you may have other appeal rights for up to a year. 
• Request a withdrawal — If you pay in full, the IRS will withdraw the lien from the public record, but typically, only if you've been compliant with payments and filings for the last three years. However, even if the lien hasn't been released due to full payment, you can get a withdrawal if you owe less than $25,000, set up direct debit installment payments, and make three on-time monthly payments.  
• Subordinate the lien – This is when you ask the IRS to let its lien take priority behind another lienholder. Most commonly, this happens if you want to take out a loan using an asset as collateral.

The right option varies based on the situation, but an experienced tax professional can help you come up with the best strategy to reduce the impact of the tax lien and resolve your tax debt with the IRS. 

Finding a Professional Who Can Discharge a Tax Lien

Not all professionals have experience with discharging tax liens. Our network has the ability to filter pros with this exact type of experience. You can visit this link here to view the pros with lien discharge experience, or you can start your search below and apply the applicable filters for your problems (for example, tax liens) and/or desired solutions (for example, lien discharge).

IRS Fresh Start Program Overview

IRS Fresh Start Initiative: What Is It? Can It Really Help?

The initiative is an extension of the IRS Restructuring and Reform Act of 1998. The IRS launched the Fresh Start Initiative in 2011 to help taxpayers who owe back taxes get a fresh start. Over the years, the initiative progressed with incremental changes to IRS collection procedures.

The changes include parts that help taxpayers follow federal tax rules. They also help them pay IRS taxes they owe. More importantly, the changes helped more taxpayers avoid federal tax liens and get them withdrawn.

In recent years, the IRS has made this program even more enticing. The changes are real and IRS forgiveness is a possibility for more taxpayers.

Key Takeaways

• Fresh Start Program – A series of changes the IRS made in 2011 to help taxpayers deal with tax debt more easily.
• Fresh Start Application – There's no application. Instead, figure out which IRS relief option you want and apply directly for that program.
• Is it a limited time offer? – No the Fresh Start refers to procedural changes the IRS made over 15 years ago. It's not a limited-time offer, but some tax problems need fast action.
• Is the Fresh Start still active? Some changes still apply; other programs have improved even more since the original IRS initiatives.
• How to get help – use TaxCure to find a tax professional today.

What Is the IRS Fresh Start Program?

The IRS Fresh Start Program is a collection of tax debt relief programs rolled out by the IRS in 2011. The IRS created this program to help taxpayers get out of tax debt and have a fresh start. In particular, the program made it easier to settle your tax debt through an offer in compromise.

Is The Fresh Start Initiative Legitimate?

Yes, the IRS Fresh Start Program is legitimate. The IRS created this initiative to help taxpayers get a fresh start. However, you don't apply to the IRS Fresh Start Program. There is no IRS form that says Fresh Start Application.

If you have tax debt, you can apply for a payment plan. You can also ask for an offer in compromise or use other IRS tax relief programs. The Fresh Start Initiative simply expanded the eligibility criteria for some of these programs.

Why are people still talking about the Fresh Start Program if it's more than a decade old? Big tax relief firms use this program as a marketing hook. They put ads on the radio, TV, internet, and print media about the Fresh Start Program.

People with tax debt hear the ads and search for the program online. They then find websites that sell tax debt relief services.

You can find a little bit of information about the Fresh Start Initiative on the IRS's website, but not much. Again, this program started more than 12 years ago so, the IRS isn't even really talking about it anymore.

If you call the IRS and ask about the program, the agent will say it was a bunch of changes to collection processes and the offer-in-compromise program years ago. And since those changes, the IRS has rolled out even better updates.

Who Qualifies for the IRS Fresh Start Program?

The Fresh Start qualification rules vary based on the tax relief program. For example, the rules for an installment agreement are different from the rules for an offer in compromise. To find out if you qualify, reach out to a local tax pro. They can review your tax debt and finances and help you choose the best program for you.

What Relief Did the IRS Fresh Start Initiative Provide?

The IRS Fresh Start Program offered penalty relief for taxpayers in 2011. It also made it easier to set up installment plans or get offers in compromise on tax debt. The Fresh Start Program let people with under $50,000 in tax debt to set up monthly installment payments.

But as of 2025, the IRS replaced this with the simple payment plan for individuals, giving you up to 10 years to repay. Note that a version of the streamlined agreement continues to exist for business taxpayers.

It also reduced the income amount the IRS considers if you apply for an offer in compromise to settle your tax debt for less. Since then, the IRS added an option that lets taxpayers take up to 24 months to pay their offer in compromise.

Here are the changes created through the IRS Fresh Start Program. Keep reading for more detailed discussions about these changes below.

1. New Rules for Tax Liens
2. Loosened the rules to Get Tax Liens Withdrawn
3. Changed the qualifications for certain Installment Agreements to ease the process (Monthly Payment Plans)
4. Easier to Set up Installment Agreements for Business Taxes
5. Eased the Rules to Obtain Offers in Compromise (Settling Taxes owed for Less Than You Owe)
6. Changes to Currently Not Collectible Status
7. Expanded Penalty Relief (Now expired)

IRS Fresh Start Tax Lien Changes

Before the Fresh Start Initiative, the IRS issued federal tax liens for all kinds of liability levels. Under the new rules, the IRS does not issue tax liens if the tax owed is less than $10,000. Note that there are rare exceptions to this rule.

A tax lien is a legal claim to your assets, and traditionally, it appeared on your credit report. A tax lien is like how if you owe money on a car loan, your lender has a lien on your car. If you sell the car, the lender can take the money from the sale. If the IRS issues a lien, it can take money you get from selling your assets.

When an IRS lien is on your credit report, lenders usually will not give you loans. Since 2018, the IRS no longer sends federal tax liens to credit bureaus so the lien won't appear on your credit report. However, the lien is still public, so creditors can find it.

IRS Fresh Start Program Made Lien Withdrawals Easier

Under the Fresh Start Initiative, the IRS also made it easier to get tax liens withdrawn. When the IRS removes a tax lien from the public record, it is a tax lien withdrawal.

You can get a tax lien withdrawn by paying off all your taxes and staying compliant for a certain period.

If you set up a monthly payment plan, you can have the tax lien removed after you make three payments in a row. However, you must owe less than $25,000 in tax debt and agree to a direct debit payment method.

Unfortunately, the IRS doesn’t always remember to automatically withdraw liens. You can request to have your tax lien removed using Form 12277 (Application for Withdrawal).

Fresh Start Installment Agreement for Individuals

An installment agreement, or a long-term payment plan, is where you make monthly payments on your taxes. With updates, the IRS let taxpayers who owed up to $50,000 set up streamlined installment agreements. A streamlined agreement offers a “streamlined” application process—you don’t have to provide a lot of financial details.

If you meet a few minimum criteria, the IRS approves your installment plan. As of 2025, this option is now the simple payment plan for individuals. It’s still available to businesses with certain restrictions.

How to Apply for an IRS Payment Plan

If you owe $50,000 or less including tax debt, penalties and interest, use the IRS’s online payment agreement tool. If you owe more than $50,000, apply using Form 9465 (Installment Agreement). The IRS may require you to share financial details if you owe over this threshold.

You can pay the IRS in several ways:

• Direct Pay
• Debit card
• Credit card
• Check
• Money order

To avoid missed payments and possible tax liens, the IRS recommends paying by direct debit or payroll deduction.

Setup fees vary based on:

• Your income level
• How you apply (online or by mail)
• Whether you choose direct debit

Standard fees (non–low income):

• Online application: $31 to $149

Low-income applicants:

• Online application: $43
• Fee waived if you use direct debit

Note: Paying with a debit or credit card will add extra charges.

IRS Fresh Start Installment Agreement for Businesses

The IRS is a lot stricter about business taxes than individual tax debt. If your business owes up to $25,000 in tax debt (not including payroll taxes), you can qualify for an installment agreement. Before the IRS Fresh Start changes, the limit was only $10,000.

If your business has employees and owes back payroll taxes, you may qualify for In-Business Trust Fund Express Installment Agreement. To qualify, you must:

• Still be in business
• Have employees
• be able to pay off all liabilities within 24 months or before the Collection Statute Expiration Date (CSED)

This payment plan is great for businesses that got behind in the first year or two of operations but now have enough revenue to cover payments on their taxes owed.

If your business is no longer operating, you may still qualify for a streamlined installment agreement:

• Owe up to $25,000 for payroll or other taxes
• Owe up to $50,000 if you are a sole proprietor

This plan allows repayment over 72 months.

IRS Fresh Start Offer in Compromise

An offer in compromise lets you settle your taxes for less than you owe. You make an “offer” of how much you can pay, and the IRS “compromises” by letting you pay less than you owe.

Generally, the IRS only accepts offers if it is the most money they could collect by any other method.

Example:

You owe $15,000 and are living on a fixed income with just enough to cover necessary expenses and you offer $5,000. The IRS may accept that amount if that is all you have.

What if you owe the same amount but have $20,000 in savings and extra income? The IRS will likely reject a low offer. They may require you to pay through a regular payment plan instead.

Applying and Qualifying for an Offer in Compromise

The Fresh Start Initiative made it easier than ever to get an offer in compromise (OIC). You can apply for an OIC on up to $100,000 in taxes. You can choose between a lump sum or a short-term periodic offer in compromise.

The program also changed how the IRS looks at your future income. This makes qualifying easier.

Income Calculation Changes

Before Fresh Start:

• Lump Sum OIC: IRS reviewed four years of income.
• Short-Term Periodic OIC: IRS reviewed five years of income.

After Fresh Start:

• Lump Sum OIC: IRS reviews one year of income.
• Short-Term Periodic OIC: IRS reviews two years of income.

These are some important rules to consider:

• Since March 2017, the IRS rejects your OIC if you have unfiled tax returns. They will keep your down payment and apply it to your tax debt.
• You must not be in bankruptcy or behind on current tax payments.
• The IRS OIC Pre-Qualifier Tool can help, but it is not always accurate. Work with a tax professional to check your eligibility.

How Much Will the IRS Usually Settle for?

Tax settlements vary based on the taxpayer's ability to pay. The IRS will usually only settle if it believes your settlement represents the most you can afford to pay. Tax debt settlements depend on your income and the value of your assets.

IRS Fresh Start Initiative: Currently Not Collectible Status

Currently not collectible status is when you show the IRS that you can’t pay your taxes. The IRS stops all collection activity on your account. CNC status is temporary. The IRS reviews your situation every two years by checking your tax returns to see changes to your finances.

The Fresh Start Initiative makes it easier to apply for currently not collectible status. If you owe less than $10,000 you may not need to provide as many financial documents.

Some common scenarios are listed below for people who generally qualify for currently not collectible status:

• You earn a modest income, and all your income goes to IRS-approved living expenses.
• All your income is from Social Security, welfare, or unemployment benefits.
• Your tax owed is almost ready to expire.
• You are unemployed and have no income.

To apply for currently not collectible status, see our section on the qualifying for Currently Not Collectible with the IRS.

Penalty Relief with IRS Fresh Start Initiative

The Fresh Start Initiative introduced special penalty relief for low income individuals or unemployed or a period of time.

In 2012, the IRS provided a six-month grace period on failure to file tax penalties for individual wage earners and self-employed taxpayers for the 2011 tax year. It let unemployed taxpayers pay taxes by the extended filing deadline to avoid the failure to pay penalty. These provisions have expired.

However, you may still qualify for the first-time penalty abatement, which existed before the Fresh Start Program.

If you do not file a return or pay late, the IRS adds penalties to your account. If this is your first penalty, you can request to have it removed.

IRS Fresh Start program requirements include:

• No tax penalties in the last three years
• Meeting other IRS qualifications

If you do not qualify for first-time abatement, you may still remove penalties by showing reasonable cause for not meeting tax obligations.

You may want to get help from a tax professional when applying for penalty abatement.

How to Apply for the IRS Fresh Start Program

The IRS Fresh Start Program is not a single program. It is a set of IRS policy changes that make it easier to resolve tax debt.

There are several ways to apply for Fresh Start relief. The process depends on whether you qualify for:

• An individual installment agreement
• A business installment agreement
• An offer in compromise (OIC)
• Currently Not Collectible status

With all these programs, you usually must meet the following IRS Fresh Start Program requirements:

• Up to date on all filing requirements.
• Current with estimated quarterly tax payments if self-employed.
• Made all federal tax deposits (payroll tax, sales tax, etc.) if you are a small business owner.
• Not in bankruptcy.

A local tax professional can help you choose the best Fresh Start option. They can also manage communication with the IRS or your state tax agency on your behalf.

The "Real" IRS Tax Debt Relief Program

You may wonder if the IRS Fresh Start Program is a real program. It is not. The IRS does not have a single program called the IRS Tax Debt Relief Program.

Large tax relief companies often use phrases like “IRS Tax Debt Relief Program” as a marketing hook. They do this to get you to call them.

You do not need to work with companies that rely on hype or misleading claims. Instead, look for a local tax professional who can help you find real solutions for your tax debt. This approach avoids gimmicks and focuses on lasting results.

Benefits of Working with a Local Tax Professional

A local tax professional can review your financial situation and help you choose the best tax relief option. They guide you through the application process and act in your best interest.

IRS agents work for the government and focus on collecting tax debt. A tax professional works for you and focuses on solving your problem. You can find a list of tax professionals here that specialize in resolving IRS problems.

You may now be able to keep your tax refund if you get approved for an offer in compromise. For a look at the specifics, check out this overview.

Why Avoid Big Tax Relief Firms

Large tax debt relief firms in this industry have a history of misleading advertising and consumer abuse. They often make promises they cannot keep. Take a look at our post on the worst tax relief firms to learn more.

Instead, look for local tax professionals who offer ethical, personalized service and focus on real solutions.

Using TaxCure, you can search for local specialists, call them, discuss your tax issue, and see if they’re the right fit. A local pro gives you hands-on help, explains your options clearly, and helps you resolve your IRS problems the right way.

Get the high-quality tax help you deserve by using TaxCure to find a local tax debt specialist in your area.

IRS Form 12153 Collection Due Process Hearing Guide

If you receive a notice that the IRS intends to place a tax lien or levy your assets, you can request a Collection Due Process (CDP) hearing. Taxpayers can file IRS form 12153 to request a hearing and appeal the lien or levy. These hearings allow you to appeal the IRS’s collection actions. They can potentially stop the lien or levy from happening.

The Office of Appeals is independent of the other IRS offices. It helps taxpayers to resolve tax controversy without litigation in a way that is fair for both the taxpayer and the IRS. But the first step to appealing a lien or levy is to file this form. The rest of this guide explains the Collection Due Process hearing, and it outlines how to appeal using Form 12153. 

What is a Collection Due Process Hearing?

A Collection Due Process hearing allows taxpayers to appeal IRS liens and levies. It is an informal hearing which can happen in person or over the phone. Oaths are not involved, and no transcript gets taken.

The hearing looks at the validity of the notice and relevant issues related to the unpaid tax. At the CDP hearing, you can attempt to obtain innocent spouse relief— that’s where you argue that your spouse or ex-spouse was exclusively responsible for the taxes owed. You may also work out a payment plan or suggest collection alternatives.

Essentially, the purpose of a Collection Due Process hearing is to figure out a compromise between the IRS’s need to collect taxes and your concerns about the collection activity. After the hearing, the IRS issues a Notice of Determination. It outlines the following elements:

• Whether or not the IRS delivered the lien or levy demand correctly—The IRS must hand-deliver these notices. Or, the IRS must send the notice via registered mail to your last known address and get a receipt that you received it.
• Whether or not a tax lien will take place
• Whether or not a levy will happen
• The details of any payment arrangements decided upon during the hearing.
• Whether or not the IRS accepted your request for innocent spouse relief or any similar defenses.
• Whether or not tax relief was offered.

After receiving the Notice of Determination, you have 30 days to appeal to the Tax Court or the US District Court.

When Do You File a Request for a Collection Due Process Hearing (Form 12153)?

Taxpayers can request a Collection Due Process hearing if they receive a Notice of Federal Tax Lien or a Notice of Intent to Levy. Usually, the IRS sends one of the following notices:

• Letter 1058 (Final Notice of Intent to Levy and Notice of Your Right to a Hearing)
• Letter 11 (Final Notice of Intent to Levy and Notice of Your Right to a Hearing)
• CP77 (Notice of Intent to Levy and Right to a Hearing)
• CP90 (Final Notice of Intent to Levy)
• CP92 and CP242 (Notice of Levy Upon Your State Tax Refund)
• Letter 3172 (Notice of Federal Tax Lien Filing and Your Right to a Hearing)

The IRS does not allow taxpayers to request these hearings for “frivolous” reasons. That includes refusing to pay tax on religious or moral grounds.

What Are Some Legitimate Reasons to Request a CDP Hearing?

You can't apply for a CDP based on frivolous reasons. So what are the legitimate reasons to request this type of hearing after you receive a notice of intent to levy or issue a lien? If any of these situations apply, you may want to apply for a hearing.  

• You want to seek payment alternatives such as a payment plan or an offer in compromise. To get these plans accepted, you must file all delinquent returns.
• You have a terminal illness and overwhelming medical bills.
• You can’t pay because you’re living on Social Security or unemployment.
• You can’t afford to pay with your income—the IRS has strict guidelines on this type of hardship arrangement.
• You want to apply for a lien subordination. That’s when the IRS agrees to put its lien as subordinate to another lien. For instance, if you want to take out a home equity loan to cover a tax bill, the lender may only give you the loan if the lien takes precedence over the IRS lien.
• You want the lien discharged so you can sell the underlying asset and pay the IRS.
• You need the lien removed from your credit report because you already paid in full or you are currently in a payment arrangement.

The IRS may be willing to accept other reasons, but those are some of the most common. When you talk with a tax professional, they can let you know the best reasons to apply for a CDP in your situation. 

What If You Don’t Agree With the Amount Due on Your Notice?

You may also request a Collection Due Process hearing (form 12153) to challenge your tax liability. However, you can only do that in rare situations. Namely, you can only challenge the amount due if:

• you didn’t receive a statutory notice of deficiency,
• you didn’t receive a notice to file a Tax Court petition,
• or if you didn’t have a chance to dispute your liability previously.

You cannot bring up issues that have already been heard.

If you don’t meet those criteria, there are only three ways to appeal the amount due at this point:

• Pay the taxes in full. Then, file a refund claim and appeal when the IRS denies your refund.
• Request an audit reconsideration with new information.
• File an Offer in Compromise for doubt as to liability.

All of the above options are complicated, and you may want to get professional help in all of those situations.

How Do You File a CDP Request?

To request a Collection Due Process Hearing, you need to complete Form 12153 (Request for a Collection Due Process or Equivalent Hearing). This form is pretty straightforward. It requests your name, ID number, address, phone number, and the best time to reach you. You also have to include information from your tax lien or levy notice.

You can tick a box if you want to apply for innocent spouse relief. Otherwise, you need to write in your reason for requesting a hearing. It is an essential part of the form, and you won’t obtain a hearing if you don’t supply a sound reason. You can use any of the reasons listed above or any that were brought forth by your tax professional.

Send the form to the collection office that started the compliance action. Usually, this is a small business or self-employed collection division of the IRS. The notice that you receive should have specific instructions on which IRS address to send this form to. 

What If You Don’t Meet the 30-Day Deadline?

You have 30 calendar days to request a levy hearing after you receive a Notice of Intent to Levy. You have five business days plus 30 calendar days if the IRS issues a notice of federal tax lien. The IRS is strict about both of these deadlines. The IRS will only respond to your request if you postmark the IRS form by the last day of the 30-day period (or the last day of the 30-day plus five business days) after receiving your Intent to Levy or Tax Lien notice.

If you don’t submit the form within the correct time frame, you still have options. At this point, you can request an Equivalent Hearing. You have one year and five business days from the filing date of your Federal Tax Lien to make this request or one year from the date of your levy notice. In these cases, the levy may go forward, and the IRS can take your assets, but if the hearing is successful, the IRS will stop the levy. 

How to Apply for an Equivalent Hearing

You can apply for an equivalent hearing using Form 12153 as well. Simply, look at the second question on the form. It asks if you want to apply for an equivalent hearing. You just need to tick the box. Note that you must tick the box on the application. If the IRS receives your request for a CDP hearing late, the agency won't automatically convert your request for a CDP hearing to an equivalent hearing. You must specifically ask the agency for this type of hearing. If you're not sure whether or not you're applying by the deadline, you can request the CDP hearing. Then, you can also mark that you want an equivalent hearing if your CDP application isn't received in time.  

If you apply for an equivalent hearing, the IRS will not release the lien or stop the levy. The IRS also won't pause the clock on the statute of limitations. These are the two main drawbacks of asking for an equivalent hearing instead of a CDP. Generally, you only want to take this option if you missed the deadline, but in either case, you should consult with a tax pro to figure out the best option in your situation. 

What Happens After You Request a CDP Hearing?

Once the IRS receives this form, all collection activity stops, and the 10-year statute of limitations pauses. If there is a levy against you, it will be suspended while the process is pending. For instance, if the IRS is garnishing your wages, that will stop when you file Form 12153 to request a hearing. In rare situations, however, the levy may stay in place — this typically only happens if the tax collection is in jeopardy.

The statute of limitations on collections is also paused while the hearing is pending. Normally, the IRS has 10 years to collect on a tax debt, and once this window passes, the IRS can no longer collect on the bill. When the statute gets paused, the time gets added back on once the statute is no longer paused. To give you an example, imagine that you request a CPD hearing, and the IRS has five years and one month left to collect on the tax debt. The time that passes while the state is paused doesn't count. When the hearing process is complete, the statute will be unpaused, and the IRS will still have five years and one month to collect, even if several months have passed. 

How the IRS Processes CDP Hearing Requests

Once you submit the request, the collection officer may choose to continue working with you. They can work with you for up to 90 days at their discretion. If you haven't reached a resolution after 90 days, they must forward the CDP hearing request to appeals. However, the collection function employee doesn't have to wait this long. They can opt to send your hearing request to the appeals office immediately.

If you want to speed up the process, tell the collection employee that you want them to send in the CDP hearing request. They are supposed to send it to appeals when you request them to do so. After appeals receives your request, a hearing settlement office will issue a contact letter. The letter will let you know that you have the opportunity to talk with appeals about why you disagree with the lien or levy. It also informs you that you get to discuss alternatives. For instance, you might want to suggest monthly payments instead of having the IRS issue a levy against you. 

How You Get the Results of a CDP Hearing

After the CDP hearing, appeals will issue a Notice of Determination letter. This outlines what was decided in your situation. In particular, it tells you if the lien or levy is going to happen and/or if your alternative payment options have been accepted. After an equivalent hearing, appeals issues a Decision Letter. You may receive additional letters depending on the situation. 

What If You Don't Agree With the Results of the CDP Hearing?

If you don't agree with the outcome of the CDP hearing, you have the right to petition the US Tax Court. You can opt between self-representation or professional Tax Court representation.

Then, the Tax Court will review the decision made by appeals. After the Tax Court makes its decision, it's final. Unfortunately, with an equivalent hearing, you don't have the option to appeal to the tax court. 

Requirements for Collection Due Process Hearings

Appeals must meet strict criteria when processing CDP requests and holding hearings. To protect taxpayer's rights, appeals must comply with the following requirements:

• Following established procedures based on whether taxpayers request a CDP hearing or an equivalent hearing. 
• Ensuring taxpayers only get one hearing for the tax period related to the lien or levy. 
• Providing an impartial hearing officer unless the taxpayer waives this requirement. 
• Including documentation in the case file to show that the legal or administrative procedures were met. 
• Updating the case file to reflect that the taxpayer was allowed to talk about the unpaid tax, the proposed lien or levy, innocent spouse relief if applicable, collection alternatives, and the tax liability at the hearing. 
• Documenting in the case file that the hearing office balanced efficient tax collection with the taxpayers concern about the collection actions. 

When the Treasury Inspector General for Tax Administration looked over these processes in 2022, it discovered that appeals was following the majority of the rules. However, it discovered some issues with pausing the collection statute of limitations. ITs report estimates that the collection statute is incorrect on between 2500 and 3200 taxpayers who request CPD hearings every year. To protect your rights, you should work with a tax professional who can help to ensure that the IRS is processing everything correctly.

Help With a CDP Request

Here at TaxCure we have a network of tax professionals from around the country. Each professional has their own specialties and agencies they service. We have a unique algorithm that ranks professionals based on their work experience. To find the top-rated professionals in helping with CDP requests, follow this link here to see the search results, or start your search below where you can filter by agency, problems, solutions and more.