Understanding the IRS Fresh Start Program

Many individuals dealing with tax debt may have heard of the IRS Fresh Start Initiative. But what is the Fresh Start Initiative? How does it help you get out of tax debt? Who can qualify?

Here’s what you need to know.

What is the IRS Fresh Start Initiative?

The IRS Fresh Start Relief Program started in 2011 and was designed to give taxpayers with first-time tax debt a second chance. It includes:

• 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 an FTL release once the debt has been paid off.
• Withdrawing FTLs occurs more frequently when you enter 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 for and use.

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 you can afford to pay per month.

These changes saw the IRS take 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 its determinations. The changes the IRS made to the Fresh Start Initiatives in 2012 still exist today to assist taxpayers in resolving their tax debt.

Who qualifies for the IRS Fresh Start Initiative?

Individuals can use the IRS Fresh Start Initiative to pay their tax debt over time through a direct payment installment agreement when:

• You owe less than $50,000 or can pay a larger liability down to that amount.
• You can pay off the remaining debt in 72 months or less.
• It’s the first time you’ve fallen behind on IRS tax payments.
• You agree to the direct payment installment agreement.
• Your tax filings are up-to-date through the most current tax year.
• You maintain the installment agreement, stay current with tax filings, and don’t incur new tax debt when the installment agreement is in effect.
• You file for an OIC and can pay the agreed settlement amount off within 5 months from the date the offer is accepted or 24 months from the date the offer is filed.

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

• If you 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 IRS Fresh Start regulations are applicable when:

• The business owes less than $25,000 and can be paid within 24 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 IRS 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 to consider. We can help you understand whether you qualify and how you can benefit from the IRS Fresh Start program.