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What If I Owe Money to IRS but Have Child Support Payments?

If you owe the Internal Revenue Service (IRS) money, you are not the first person, and you will not be the last. Depending on how much money you owe, you might be eligible for a payment plan. Here's what you need to know about the IRS payment plan and how it affects child support and existing wage garnishments.

Summary

The IRS Fresh Start Program, was created in 2008. This plan is designed to assist individuals and business taxpayers who are struggling to pay back their taxes.

Even if you are in arrears with your payments, make as many payments as possible to show the IRS that you are trying to get back on track with your finances. If you can, pay more than the weekly or monthly specified amount to catch up quicker.

Child Support and Wage Garnishments

Wage garnishments are not established unless you are severely behind on your child support payments. You are considered in arrears if you haven't made full child support payments in several months. By law, 50% of your pay can be garnished for child support. If you are not supporting a spouse or another child, 60% of your paycheck can be garnished for child support. 65% of your paycheck can be garnished if you are more than 12 weeks behind on child support payments.


What is the IRS Fresh Start Program and How Can it Help?

The IRS Fresh Start Program, was created in 2008. This plan is designed to assist individuals and business taxpayers who are struggling to pay back their taxes. The Fresh Start Plan provides reasonable payment plans for a specific period to help people catch up on their tax payments.

Who Can Apply for the Fresh Start Program?

Taxpayers who are experiencing financial hardships are the primary people who apply for the Fresh Start Program. Other individuals who apply are taxpayers who have bad credit and taxpayers who have special circumstances or special tax problems. Other individuals who apply for this IRS payment plan are taxpayers who have used other tax repayment plans, such as applying for CNC status and still have difficulty paying their taxes.


What Are the Qualifications for the IRS Fresh Start Program?

There are different qualifications of the IRS Fresh Start Program you must meet before you can become a candidate for this program. A few of the qualifications are:

  • Balance of $50,000 or less: the decision to increase the threshold for IRS installment agreements was made in 2012. If you fall into this category, you might qualify to make monthly or annual payments to catch up on back taxes. The maximum period for installment payments is 72 months.
  • Insufficient annual income: you need to prove you earn less than $100,000 per year. If you are married, you need to prove you and your spouse make less than $200,00 per year. To become eligible for the IRS Fresh Start Program, you need to provide that paying your entire tax liability will result in financial hardship.
  • A decrease in net income: this qualification applies to self-employed taxpayers who experienced a minimum of a 25% decrease in business income. A sudden decline in business could be due to an economic downturn, such as a global recession and sudden unemployment for yourself or your spouse for 30 consecutive days.
  • Correctly Filing Tax Returns: if you haven't missed filing a tax return, this could boost your chances of qualifying for the IRS Fresh Start Program. If you can show the IRS complete documentation that you have filed your tax return each year, qualifying for this IRS program could result in your favor.
  • An Inability to Pay: if you are not able to pay your taxes due to a specific circumstance or bankruptcy, this situation needs to be disclosed to the IRS. If you are considering filing for bankruptcy as an individual, you need to file a Chapter 13 bankruptcy. If you are a business taxpayer, you need to file a Chapter 7 or Chapter 11 bankruptcy.
  • Foreign-derived assets and income: to qualify for this instance, you must have assets or earn income from outside of the United States. Foreign assets and income is a sensitive subject for the IRS because there has been a lot of reported tax fraud with offshore assets. It's in your best interest to be prepared. Before you have your IRS assessment, consider looking into the IRS Offshore Amnesty Disclosures Program. This program can help you properly address and disclose any foreign income and assets, and help prevent extra tax penalties.

Other Tips That Can Help with Child Support/Wage Garnishment, and the IRS Fresh Start Program

Get Organized

Getting organized is the best way to help yourself and get your taxes situated. Gather as many documents as you can to help prove that you are a responsible individual and have every intention of paying the money you owe. The more reliable you look on paper, the better chance you have of being accepted into the program.

Keep Track of Child Support Payments

Even if you are in arrears with your payments, make as many payments as possible to show the IRS that you are trying to get back on track with your finances. If you can, pay more than the weekly or monthly specified amount to catch up quicker.

The IRS Fresh Start Program has a lot of different requirements to help people with back taxes, but don't let that discourage you from applying. It's time to get back on track with your finances. Making things right with the IRS is a great place to start.