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How The IRS Determines Your Eligibility For Tax Help Programs: Reasonable Collection Potential

Americans who owe past taxes have access to the Fresh Start Program, but how does the IRS assess who qualifies for these programs of tax help? Calculating your reasonable collection potential is a fairly simple solution.

The Fresh Start Program has been a useful tool for people to resolve their tax burden since 2011. However, more enquiries than ever before about the Fresh Start Program are being made as a result of the expansion of the IRS workforce and growing inflation.


What is the IRS Fresh Start Program?

The IRS provides a number of tax help options, collectively known as the Fresh Start Program. It's crucial to remember that the Fresh Start Program is a collection of initiatives rather than a standalone tax help initiative.

The Fresh Start initiative comprises three primary tax help programs:

  • Offer in Compromise (OIC)
  • Installment Agreements (IAs)
  • Currently Non-Collectible (CNC)

Here is a short description of each program. The requirements differ for each and each has its own set of guidelines and regulations.

Offer in Compromise (OIC)

An offer of compromise is the best feasible approach for tax reduction. In an OIC, the IRS settles with the taxpayer for less than they are owed.

Taxpayers should be very happy about this!

The IRS states that in order to be eligible for an OIC, you must:

  • Show that you are unable to pay (prove income, expenses, and asset equity).
  • Fill out any incomplete or erroneous tax returns.
  • Pay all the necessary current-year estimated tax payments.
  • The amount the taxpayer offers to settle for must be less than your reasonable collection potential (RCP).

The reasonable collection potential (RCP) in OICs serves as a defining characteristic. Any number will not be accepted by the IRS. The IRS will instead determine how much they think they can recoup from you. The RCP is the name of this figure.

You must promise to pay more than the IRS estimates your ability to pay in order to file for an OIC. The requirements are really stringent. Below, we'll cover RCPs in more detail.

Installment Agreements (IAs)

A payment schedule for the IRS is the same as an installment arrangement. When Americans incur tax debt, the sum is frequently enough large to prevent them from making an immediate payment.

The IRS will issue you an IA if they believe your RCP is sufficient to pay out the obligation. You will pay the IRS a certain amount each month, as you would anticipate.

There are long-term IAs and short-term IAs (no longer than six months).

Currently Non-Collectible (CNC)

An IRS tax delay option known as a currently non-collectible is (CNC) made available to anyone who they believe to be facing financial hardship.

For instance, people who are unemployed and have unpaid taxes are most likely eligible for a CNC.


How does the Fresh Start Program work?

A taxpayer who owes money to the government but is unable to do it right immediately is eligible for the IRS Fresh Start Program.

The IRS gives numerous options to help taxpayers address their taxes since it acknowledges that this is a terrible circumstance.

Your RCP is established by the IRS based on your financial capacity. Your assets and income are taken into consideration. Your liquidation estimate is used by the IRS to assess your capacity to pay back taxes.

However, not everyone is qualified for every program. Your realistic collection potential greatly influences whether you are eligible for the program.


Eligibility Criteria for the Fresh Start Program (Tax Help Qualifications)

The following general requirements for the Fresh Start Program are listed:

  • All unfiled or incomplete tax returns must be filed.
  • Show you can't afford to pay your back taxes.
  • Pay your projected taxes on time for the current tax year.
  • Show that paying the outstanding taxes would be extremely difficult financially.
  • Verify that you meet the eligibility requirements once more.

In some programs, the taxpayer has to fulfill a certain prerequisite. For instance, the sum offered to the government through the OIC tax help program must exceed the taxpayer's RCP. In other words, the taxpayer is required to contribute more than the minimum sum that the government determines they can afford.


How to Apply for Fresh Start

To apply for the Fresh Start Program, you must provide the IRS with proof of your inability to pay.

The IRS will determine your RCP and inform you of which Fresh Start Programs you qualify for based on these documents.


The Takeaway

If you have a certified tax help company on your side, your chances of obtaining an offer in compromise (or another tax help program) increase dramatically. Americans for Tax Help has a team of tax professionals who will not accept a less-than-ideal settlement since they have a thorough understanding of the IRS Fresh Start Program requirements.

Let Americans for Tax Help you get the tax resolution you deserve. Check out their free tax consultation to learn more about what they can do for you!



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