The Fresh Start Program

The Fresh Start Program, or the Fresh Start Initiative, was created in 2011 by the Federal Government. It is a response by the Federal Government to the predatory practices of the IRS, who use compounded interest and penalties to punish taxpayers with outstanding tax debt. 

The Fresh Start Initiative Program provides tax relief to taxpayers who owe money to the IRS. Fresh start tax relief can help taxpayers who owe much more than they can reasonably afford to pay. 

For taxpayers that qualify, they can significantly reduce their federal tax debt under certain circumstances. Sometimes, they can achieve reductions of 90% or more. 

Why is it Called the IRS Fresh Start Initiative Program? 

The IRS Fresh Start Initiative is the same as the Fresh Start Program. Understandably, there is some confusion when it comes to the different names.

Many Americans are sometimes confused why the program can also be called the IRS Fresh Start Program or Initiative.

Though the Federal Government created the program, the IRS is obligated to offer it to eligible taxpayers. So it is appropriate to call it the IRS Fresh Start Program

How Does the Fresh Start Program Work? 

Say a taxpayer owes the IRS $15,000 due to years of back taxes plus compounded interest and penalties. He is also out of work and can barely afford utilities and living expenses. He does not have the means to pay the IRS $15,000. Most likely, he will never have the means to repay the IRS.   

The Fresh Start Program helps this hypothetical taxpayer reach an agreement with the IRS. If eligible, the taxpayer will pay an amount that they can reasonably afford. 

The financial situation of the taxpayer is the IRS’s primary criteria for evaluation. The program mandates that the IRS cannot collect more than a taxpayer can pay.

There are four main programs available to taxpayers through the Fresh Start Program:

  1. Installment Agreement
  2. Offer in Compromise 
  3. Currently Non-Collectible Status
  4. Penalty Abatement  

Installment Agreement

An installment agreement is a payment plan offered through the Fresh Start Program. It allows taxpayers to pay an agreed-upon amount every month to the IRS. These payments go directly to the taxpayer’s overall tax debt and continue until they pay their debt in full. 

Once on an installment plan, you will no longer receive IRS collection letters or be susceptible to penalties. This plan is also a great way of showing the IRS that you are willing to resolve your debt. 

A downside is that the IRS will continue to apply interest to your total debt. You will end up paying more than your original amount. 

While an installment agreement is a valid form of fresh start tax relief, compromising with the IRS for a reasonable monthly payment is difficult. Your chances of making smaller monthly payments are more likely if you use a tax relief company to represent you on your behalf.  

Offer in Compromise

An IRS Fresh Start Program offer in compromise, or an OIC is an agreement that allows taxpayers to resolve their tax debt for less than the full amount they owe. It is the best form of Fresh Start tax relief available through the Fresh Start Initiative. 

Although an offer in compromise is the best option available through the Fresh Start Program, the qualifications are strict. Typically, the IRS will only accept taxpayers who do not have the financial resources to pay off their federal tax debt in full. 

However, due to the strict qualification requirements for an OIC, not everyone who owes thousands of dollars to the IRS will qualify for the program. 

Your chances of achieving an offer in compromise increase tremendously if you have a certified tax relief company on your side. Tax experts have a great understanding of the IRS Fresh Start Program qualifications and will not be bullied or tricked by the IRS into a less-than-optimal resolution. 

Refer to our “How to Avoid Tax Relief Scams” section to ensure that you stay away from fraudulent companies. The IRS is the only one that can approve of an offer in compromise. But, these companies will promise you an OIC without first analyzing your specific tax situation or preparing the necessary forms for the IRS.

Currently Non-Collectible Status

Unlike the previous Fresh Start tax programs, Currently Non-Collectible is a status rather than a form of Fresh Start tax relief. The IRS will place a taxpayer in Currently Non-Collectible status if the taxpayer cannot pay their taxes. 

While this status does not necessarily remove tax debt, it does stop any collection activities. Such activity includes bank levies, wage garnishments, tax liens, and threatening letters from the IRS.

Currently Non-Collectible status allows a taxpayer to find fresh start tax relief in peace, without the IRS coming after them. 

To qualify for Currently Non-Collectible status, you will need to meet the IRS Fresh Start Program qualifications – which we discuss below. 

We highly recommend that you consult with a tax professional before requesting this status from the IRS. Should you try to apply for the IRS Fresh Start initiative program on your own, the IRS will try to get you to agree to terms that are more favorable for them.

Additionally, once Currently Non-Collectible status ends, the IRS will come after you. A tax relief company can help you stay in this status for as long as possible. And, they can help you develop a strategy for when you leave Non-Collectible status.    

Penalty Abatement 

Penalty Abatement is the term the IRS uses for wiping out or reducing a penalty. However, the IRS will only apply penalty abatement for a reasonable cause. Penalty Abatement can be considered a form of Fresh Start tax relief.

You can request penalty abatement at any IRS level. An IRS campus, automated collection system, or personnel at local IRS officers. Keep in mind a local IRS office can only grant a penalty abatement of up to $100. Requesting penalty abatement is free.

The IRS will not accept a request for a program of the Fresh Start Initiative without sufficient evidence. When mailing a request, include as much supporting evidence as possible. Documentation is the best form of evidence against the strict IRS Fresh Start Program qualifications.

The documentation you will need includes – but is not limited to – doctor statements, fire department reports, insurance claims, or death certificates of family members. We would also advise including a letter with your Form 843 explaining your situation.

The best way to prevent your request from being denied is to contact a professional tax relief company. Even if you get a denial, you can file a letter of appeals.  

What are the IRS Fresh Start Program Qualifications?

Fresh Start tax relief is only possible for those that qualify. 

To meet the IRS Fresh Start Initiative qualifications, you must be able to prove that paying your tax balance would cause significant financial hardship. The severity of your financial hardship determines what kind of fresh start tax program is available to you. 

While the IRS has guidelines for what constitutes a financial hardship – the responsibility to prove the hardship falls to you, the taxpayer, or the tax relief company hired to represent you.

Additional requirements you will need to obtain Fresh Start tax relief include: You must file all of your missing or unfiled tax returns. Your estimated tax payments must be current, or your current withholdings must be correct. Finally, you have to be either current or correct on all filings for the last six months.

The IRS Fresh Start Initiative Program 2021

The Fresh Start Program expanded in 2012, shortly after its creation. The expansion made it so more taxpayers could apply for tax relief. The most relevant change to the program was that when the IRS is considering a taxpayer for an offer in compromise, they ease their calculation for the taxpayer’s future income. 

Since 2012, there have been no significant changes to the program. Nevertheless, the rate at which IRS examiners qualify taxpayers for tax relief has fluctuated throughout the past years.

In 2020, the Fresh Start Tax Program saw record numbers of qualifications. The large increase in accepted offers was due to the pandemic, which resulted in financial hardships for millions of Americans. The IRS was very lenient that year and may not be as forgiving again unless a similar situation were to arise.

However, plenty of taxpayers are still experiencing financial hardships in 2021 – especially, small-business owners. Tax experts predict that the IRS Fresh Start Program qualifications could remain loose for a little while longer.

The best way to know if you qualify is to check your eligibility as soon as possible for the 2021 IRS Fresh Start Initiative Program.   

Next Steps 

If you are considering applying for the Fresh Start Program, our experts can guide you through the process. Give us a call at 833-419-RISE (7473).

Qualify today for a Fresh Start.

Learn how easy it is to qualify for tax savings.