IRS Fresh Start Program

The Fresh Start Program Can Help You Pay Your Tax Debt

Do you still have unpaid taxes that you think will take a long time to pay? Have back taxes been holding up your life? If so, apply for the IRS Fresh Start Program to help you find tax debt relief to get moving again. Fresh Start tax relief helps taxpayers quickly settle tax debt problems that led to receiving letters and notices, phone calls, and collection action from the IRS. The Fresh Start Initiative is an excellent tax relief program for people who qualify because the IRS believes they will otherwise be difficult to collect unpaid taxes from.

What Is the Fresh Start Program?

In 2011 the IRS launched the Fresh Start Program as a tax relief initiative for individuals and small businesses. Fresh Start helps stop tax liens, wage garnishment, back account levies, and other IRS collections for unpaid taxes. You’ll hear the Fresh Start Program called the IRS Fresh Start Initiative or Fresh Start Tax Relief Program.

The IRS Fresh Start Program is not just one tax relief program to help taxpayers settle back taxes. Fresh Start programs cover many tax relief initiatives available to help individuals and small businesses struggling with back taxes. These tax relief programs include Offer in Compromise (OIC), Payment Plans and Installment Agreements, Currently Not Collectible (Hardship Status), Penalty Abatement, and Tax Lien Relief. How much you owe the IRS and your financial situation determines which Fresh Start initiative is the best fit.

If you apply for tax relief through the Fresh Start program, the IRS will work with you to settle your unpaid taxes in less time when you qualify for a fresh start. You could settle your back taxes, including penalties/interest, in two years or less with the Fresh Start Initiative. Other tax relief programs can take four or five years to resolve even moderate tax debt.

How Does the Fresh Start Program Work?

The Fresh Start program works by matching you with a tax debt relief program in which you settle your IRS debt without liens and levies. To determine which program you qualify for, you first need to be current on your tax returns, even if you are not current on your tax payments.

When you apply for the Fresh Start Initiative, the IRS considers your ability to pay your tax debt liability. If you’re spending on non-essentials instead of paying back taxes (“dissipated assets”) that’s counted as what you could’ve paid. The IRS is also more relaxed about “income-producing assets.” This is when small businesses still operate but you don’t count your share towards back taxes you can pay. They cut you some tax relief slack with the Fresh Start Program by being more realistic when you apply.

Depending on your tax debt situation, you may qualify for different tax relief options as part of the IRS Fresh Start Initiative. Fresh Start programs include Offer in Compromise, IRS Payment Plan or Installment Agreement, Currently Not Collectible Status, IRS Penalty Abatement, and Tax Lien Withdrawal.

IRS Offer in Compromise (OIC)

You may have heard about the IRS Offer in Compromise, or OIC tax relief program. An OIC is where you submit an offer to pay the IRS less than you owe due to difficult financial circumstances. This is a popular Fresh Start program, as it saves you the most tax money. The IRS Fresh Start Initiative makes the OIC program more flexible and applies to both individual taxpayers and small businesses.

Fresh Start Program Offer in Compromise Updates

Some common-sense modifications to Offer in Compromise deals were added under the Fresh Start Program. These OIC updates also change financial analysis that the IRS uses to determine what tax relief offers to accept. For example, depending on your circumstances, with the Fresh Start tax relief program the IRS may now:

Change the picture of how much money the IRS expects you to earn in the years to come.
Allow you to include payments on your delinquent state and local taxes.
Give more room for the Allowable Living Expense (IRS Collection Financial Standards) that covers your costs of daily living.
Allow you to include paying your student loan bills.

In other words, with Fresh Start tax relief, the IRS is less interested in putting financial issues on hold while you settle tax debt with them.

Keep in mind the IRS is more likely to accept your Offer in Compromise if you submit an accurate offer. When reviewing your OIC application, the IRS considers reasons why they might not get paid, evidence of economic hardship, and proof of doubt as to liability (additional Form 656-L).

Fresh Start Program Offer in Compromise Forms

To submit an Offer in Compromise, complete Form 656 and Form 433-A. IRS Form 433-A is the Collection Information Statement for Wage Earners and Self-Employed Individuals. In addition to these OIC forms when you apply, provide supporting documents. These documents include paycheck stubs, bank statements, home mortgage statements, and vehicle registrations.

IRS Payment Plans and Installment Agreements

With an IRS payment plan or installment agreement, you make fixed monthly payments until you pay off your back taxes. Typically, you’ll have 72 to 84 months to pay off your unpaid taxes with an IRS payment plan. If you qualify for installment agreement tax relief under the IRS Fresh Start Program and make monthly payments on time and in full, the IRS will not penalize you with a tax lien or levy.

The IRS offers three standard payment plans.

“Pay Now” by check, credit/debit card, money order, ACH transfer, or EFTPS if you can pay your full tax debt.
Short-term payment plan with no fees if you can pay your full tax debt in 120 days or less. Payments can be made using IRS Direct Pay or credit card (for a fee).
Long-term installment agreement to make monthly payments if you need more than 120 days to pay your tax debt. Fresh Start installment payments can be made by direct debit from a bank account, check, credit/debit card, or money order. Installment agreement setup fees range from $31 to $225 depending on if you do apply online and your payment method.

No matter which IRS payment plan you qualify for with the IRS Fresh Start Initiative, you’ll continue to accrue penalties and interest. Bottom line, your tax debt will grow until your back taxes are paid in full.

IRS Currently Not Collectible Status (CNC)

Sometimes it’s impossible for an individual to make a tax debt payment. In these cases of significant financial hardship, the IRS will consider pausing its collection efforts temporarily. This IRS Fresh Start program is called Currently Not Collectible (CNC) or Hardship status. If you qualify for Fresh Start tax relief with CNC status, they won’t send IRS collection notices, garnish wages, levy bank accounts, or file federal tax liens as long as your tax debt is currently not collectible.

Just like with other Fresh Start programs, Currently Not Collectible status doesn’t stop the IRS from adding to your balance. Since CNC status is temporary tax relief, the IRS will notify you before removing it. This will give you time to apply for alternative tax debt relief or IRS debt forgiveness. As soon as your Currently Not Collectible status ends, the IRS will resume sending collection notices. They’ll also pursue more aggressive collection efforts like federal tax liens, wage garnishment, and bank account levies.

IRS Penalty Abatement

IRS penalty relief, or penalty abatement, doesn’t discharge your tax debt but does remove penalties the IRS added for non-payment. You may qualify for these Fresh Start penalty relief programs: first time penalty abatement, reasonable cause, or statutory exception.

First Time Penalty Abatement

If it’s your first tax penalty, whether it’s a failure to file penalty or failure to pay penalty, the IRS offers tax relief in the form of First Time Penalty Abatement. To qualify for first time abatement as part of the Fresh Start Initiative, you must have filed tax returns each of the past three years without penalties and be current with required tax returns or extensions as well as tax payments (other than the tax year you’re requesting relief). Your tax penalty amount isn’t a factor. Request penalty abatement over the phone with the IRS or file Form 843. The IRS will review your compliance history before they accept your penalty abatement request. Generally, you won’t need to provide additional documents to support your first time abatement request.

Reasonable Cause Penalty Relief

If you don’t qualify for First Time Penalty Abatement, consider other tax penalty relief options. One such option when you’re unable to file or pay taxes on time is reasonable cause penalty relief. Common reasons include natural disasters, not being able to obtain records, or death or serious illness. For reasonable cause relief with the Fresh Start Initiative, you’ll need hospital or court records or certification of natural disaster. You can call the number in your IRS notice to see if you’re eligible for reasonable cause penalty relief.

Statutory Exception Relief

Finally, the IRS may grant statutory exception relief if you received bad advice from the IRS, mailed your return on time but still received a tax penalty, lived in a federal disaster relief assistance area, or served in a military combat zone. In these situations, request penalty relief due to statutory exception by calling the IRS or filing Form 843.

When you qualify for penalty abatement, the IRS will reduce/remove interest when your tax penalty amount is reduced/removed. It doesn’t matter if your Fresh Start Initiative penalty relief is First Time Abatement, reasonable cause, or statutory exception.

IRS Tax Lien Withdrawal

Under the IRS Fresh Start Program, the IRS increased the threshold for filing a federal tax lien from $5,000 to $10,000. If you have a tax lien just over $10,000, a partial payment will get your balance below the lien threshold. For tax balances up to $25,000, you might be able to convert it to IRS installment agreement tax relief or even have it withdrawn if the IRS collection statute of limitations has passed. With an installment agreement, you can get the tax lien withdrawn after three on-time payments. When back taxes exceed $25,000, the IRS will be stricter when considering lien removal. In some IRS Fresh Start Initiative cases, the IRS may agree to lien removal for larger tax balances. This is possible when the taxpayer agrees to make direct debit payments from a bank account. But there’s no guarantee.

To apply to have your tax lien removed under the Fresh Start Program, submit IRS Form 12227. You’ll need to explain on the form why you’re asking the IRS for lien withdrawal. Also attach documents to support why you qualify for tax relief to have your lien removed. If the IRS agrees to withdraw your federal tax lien, they’ll file a Certificate of Release of Federal Tax Lien.

What are the Fresh Start Program Qualifications?

Each of the IRS Fresh Start programs available under the initiative has different tax relief qualification criteria. Before reaching out to the IRS, it’s good to speak with a Wiztax IRS expert about your financial hardship situation.

That said, there are a few basic Fresh Start Program qualifications that may apply:

Reduction in your taxable income of 25% or more from one year to the next.
Yearly household income of less than $100,000 if you file individually or $200,000 if you file jointly.
Outstanding tax debt that does not exceed $50,000.

How Do You Apply for the IRS Fresh Start Program?

Each individual IRS Fresh Start initiative has its own eligibility and application forms. You can request Fresh Start application forms from the IRS or find them on the website at irs.gov. Wiztax can also prepare your Fresh Start Program application for you.

Offer in Compromise Form: IRS Form 656 and IRS Form 433-A
Payment Plan Form and IRS Installment Agreement Form: IRS Form 9465 (Installment Agreement Request)
Currently Not Collectible Form: IRS Form 433-A or IRS Form 433-F
Penalty Abatement Form: IRS Form 843 (Claim for Refund and Request for Abatement)
Tax Lien Withdrawal Form: IRS Form 12277 (Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien)

In addition to IRS Fresh Start Program application forms, provide documentation for why you qualify for IRS tax debt relief. Fresh Start tax relief program documents include financial statements that show your income, assets, and expenses. Examples of important documents to help you qualify for the Fresh Start Program are credit card and bank statements, mortgage and car loan payments, investment statements, healthcare and childcare bills, grocery receipts and utility bills, and transportation costs.

Last, to qualify for the IRS Fresh Start Program, all missing or unfiled tax returns must be filed. All estimated tax payments must also be current and current tax withholdings must be correct.

Fresh Start Program 2022

Since 2011 the IRS has made it possible for more delinquent taxpayers to qualify for the IRS Fresh Start Program. This includes a more flexible Offer in Compromise and relaxing future income consideration when calculating Fresh Start tax relief eligibility.

More individuals than ever have applied for the IRS Fresh Start Initiative and have been accepted in recent years. If you have back taxes and continue to experience COVID-19 pandemic financial hardships, an increase in business or student debts, or other financial setbacks due to rising inflation, you’re likely to qualify for the IRS Fresh Start tax relief program.

There have been no plans announced to end the IRS Fresh Start Initiative or reduce its availability. Most tax experts believe the IRS will continue with looser Fresh Start Program requirements to qualify for tax debt relief.

Fresh Start Program Next Steps

If you want to apply for the IRS Fresh Start Program, give Wiztax a call at 866-568-4593. We have decades of experience to help you qualify for the Fresh Start initiative that fits your situation. In fact, Wiztax can confirm your eligibility in as little as 10 minutes. We never charge for consultations or investigations. If you prefer, you can schedule a free call to learn more or simply start for free by answering 6 simple questions.