What is the IRS Fresh Start Initiative?

January 2020 | Article

By Andres Jaquez and Leslie Spires

What is the IRS Fresh Start Initiative?
If you’re dealing with tax debt, you’ve no doubt heard radio or TV ads touting the Fresh Start Initiative. But what is the Fresh Start Initiative? How does it help you get out of tax debt? What is available in way of help? Who can qualify?

What Is the Fresh Start Initiative?
The Fresh Start Initiative is not new. In fact, if you search for Fresh Start Initiative on the IRS’s website, it gives you nothing on the topic. In part, that’s because the Fresh Start Initiative goes back to 2011 when these newly designed rules focused on taxpayers who owed back taxes but had no federal tax liens filed against them. 

The IRS Fresh Start Initiative was designed to give taxpayers laden with first-time tax debt a second chance to do things right, and it included:

  • Raising the dollar amount that triggered Federal Tax Liens (FTLs) being filed from $5,000 to $10,000 initially and then to $25,000 a few months later. These changes quickly resulted in fewer FTLs being filed.
  • Making it easier to obtain a FTL release once the debt was paid off.
  • Withdrawing FTLs more frequently when an individual taxpayer entered into a Direct Debit Installment Agreement (DDIA).
  • Making Installment Agreements (IAs) easier to obtain for small businesses.
  • Streamlining and expanding the qualifications of the Offer-In-Compromise (OIC) program to make it easier to qualify and use for more taxpayers.

In 2012, the IRS expanded the Fresh Start Initiative, making it available to even more taxpayers. Revisions included:

  • An easing of how the IRS calculated a taxpayer’s future income when considering an OIC.
  • Expanding what types and amounts of expenses (including allowable living expenses, student loans and state and local tax debts) the IRS would consider reasonable and relevant when determining how much a taxpayer could afford to pay on a monthly basis.

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These changes saw the IRS taking a more common-sense view of taxpayers struggling to pay their bills. While the program was still based on specific formulas, the IRS worked to include real-life situations—the things that typically cause people to fall behind on their taxes—in their determinations.

Who qualifies for the Fresh Start Initiative?
Individual taxpayers who will accept paying their tax debt over time through an installment agreement with a direct payment structure can benefit from using the Fresh Start Initiative when:

  • They owe less than $50,000 or can pay a larger liability down to that amount.
  • They can pay off the remaining debt in 60 months or less.
  • It’s the first time falling behind on tax payments with the IRS.
  • They agree to the direct payment installment agreement
  • Their tax filings are up-to-date through the most current tax year.
  • They maintain the installment agreement, stay current with tax filings, and don’t incur new tax debt during the period the installment agreement is in effect.
  • They file for an OIC and can pay the agreed settlement amount off within 12 months.

If a taxpayer can qualify for the Fresh Start Initiative, certain bonus items can also come into play:

  • If they owe less than $25,000 or can pay their initial liability down below that amount, they may be eligible for the withdrawal of a federal tax lien.
  • A first-time tax debtor is also eligible for an abatement of specific penalties under these revised guidelines.

For businesses, the Fresh Start regulations are applicable when:

  • The business owes less than $25,000 and can be paid within 34 months.
  • The business is current with federal tax filings and payments.
  • It’s the business’s first time falling behind on tax payments with the IRS.

In addition, as a bonus for qualifying, the business may qualify for the abatement of specific penalties.

How do I learn more about the Fresh Start Initiative?
The IRS’ Fresh Start program is a way to help businesses and individuals get tax debt relief. But there are very specific parameters around the program. It’s best work alongside a trusted business advisor to help you understand whether you qualify and how you can benefit from the Fresh Start program.  

Take the worry out of dealing with the IRS and explore what the Fresh Start program has to offer.

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