Everything to know about the IRS Fresh Start program

If you owe money to the Internal Revenue Service (IRS) but can't afford to pay it off immediately, that delinquent tax debt can end up having a big impact on your financial health. After all, the IRS has lots of tools at its disposal to recoup the money owed, and over time, you may find yourself facing big penalties as your tax debt accumulates interest — including things like wage garnishments or tax liens. If that happens, it could be a significant hit to your financial well-being.

What may surprise you, though, is that while the IRS has lots of power to collect tax debt, it also recognizes that unexpected financial hardships can make it difficult to pay your taxes in full, which is why the IRS' Fresh Start program was created. This initiative, which has undergone several expansions since its 2011 launch, helps taxpayers manage their tax debt through more flexible payment options and penalty relief.

While the Fresh Start program won't offer a solution for every taxpayer, it provides several pathways to address tax debt. Understanding these options, how they work and who qualifies may be the first step toward resolving your tax issues.

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Everything to know about the IRS Fresh Start program

Here's everything you should know about this IRS tax relief program:

What is the IRS Fresh Start program?

The IRS Fresh Start program is a tax relief initiative designed to help both individuals and businesses pay back taxes and avoid tax liens. This initiative is not a single program but rather a collection of provisions that make it easier for taxpayers to settle their tax debt. These provisions include installment agreements, offers in compromise and tax lien relief options.

Find out what tax relief strategies are available to you today.

How does the Fresh Start program work?

Here's how each provision under the Fresh Start program works:

Installment agreements: The Fresh Start program's cornerstone is the expanded installment agreement option. Taxpayers who owe up to $50,000 can set up long-term payment plans lasting up to 72 months. This is a significant increase from previous limits and also comes with a streamlined approval process. The IRS has also reduced the financial documentation required for these agreements, making it easier for taxpayers to qualify.

Offer in Compromise: The Offer in Compromise (OIC) option allows taxpayers to settle their tax debt for less than the full amount owed. Under Fresh Start, the IRS made OIC more accessible by introducing more flexible terms and a streamlined application process. As part of those changes, the program now considers your current income and assets rather than future earning potential when evaluating your ability to pay.

Tax lien relief: The Fresh Start program has also made significant changes to how the IRS handles tax liens. The program increased the tax debt threshold for filing a lien from $5,000 to $10,000, meaning fewer taxpayers face liens on their credit reports. The IRS has also made it easier to get liens withdrawn after paying tax debt or setting up a direct debit installment agreement.

How do you qualify for the Fresh Start program?

Eligibility for Fresh Start benefits depends on several factors. For individuals, you must:

• Owe less than $50,000 for installment agreements
• Be current with all tax return filings
• Not be in an active bankruptcy proceeding
• Have filed all required tax returns

Who does not qualify for the Fresh Start program?

Several factors can disqualify taxpayers from participating in the Fresh Start program. The taxpayers who may not qualify for this program include:

• Individuals who haven't filed all required tax returns or are not current with estimated tax payments
• Those currently involved in an open bankruptcy proceeding
• Self-employed individuals who haven't made all required estimated tax payments for the current year
• Taxpayers who can pay their tax debt in full through liquidating assets or taking out a loan
• Those who have rejected previous installment agreements or failed to comply with past agreements
• Those with an active OIC investigation
• Taxpayers involved in criminal tax cases

How to apply for the IRS Fresh Start program

The application process varies depending on which Fresh Start option you're pursuing. Here's how to apply for each option:

For installment agreements

• Complete Form 9465 
• Provide detailed financial information using Form 433-F
• Submit all required documentation, including proof of income and expenses, and pay the setup fee

For Offer in Compromise

• Complete Form 656 
• Fill out Form 433-A (for individuals) 
• Submit the application fee 
• Provide comprehensive financial documentation
• Continue making estimated tax payments while your offer is reviewed

For tax lien withdrawal

• Request withdrawal using Form 12277
• Ensure all tax returns are filed
• Set up a direct debit installment agreement (if required)
• Maintain compliance with all payment terms

The bottom line

The IRS Fresh Start program can be a great opportunity for taxpayers struggling with tax debt to find relief and regain their financial stability. While it won't result in complete forgiveness of your tax debt, it provides realistic options for managing tax debt through more favorable terms and flexible payment arrangements. That, in turn, can put you on a path toward resolving your outstanding tax debt, making it a lot easier (and a lot less stressful) to manage your finances.