What is the IRS Fresh Start Program? How does it work?

March 26, 2020 by Carolyn Richardson, EA, MBA
Four jars with money and plants growning

You may have heard about the IRS’s “fresh start” program and wondered if you could use it to settle your tax debt. But what exactly is the Fresh Start program, and how does it work?

The Fresh Start program is designed so that taxpayers pay their debt in full within six years, and without a serious financial burden being placed upon them. It is open to any taxpayer who owes the IRS $50,000 or less in tax debt. The IRS originated the program in 2008 and expanded it in 2012 to ease the qualifications and financial burdens of taxpayers.

The Fresh Start program simplifies the process of paying back a significant tax debt and relieves some of the burdens that come with owing the IRS large sums of money, such as liens, levies, wage garnishments, and penalties. There are three repayment options under the program: an extended installment agreement, tax lien withdrawals, and the Offer in Compromise.

The most common of these options is the extended installment agreement and is designed for those taxpayers owing $50,000 or less. Under this option, taxpayers can pay off their tax debt over a period of up to six years without the imposition of additional penalties or interest. The IRS will also suspend collection actions like wage garnishments, tax liens, or tax levies. The taxpayer makes monthly payments under this program in an amount based on their income and the value of assets they have at their disposal. The aim is to have the payments affordable to the taxpayer so they can pay them on time and without a financial burden.

Under the tax lien withdrawal, taxpayers can pay off their debt using a direct debit payment option. Once this is set up, the taxpayer can request that the IRS remove any tax liens on their accounts. This also helps taxpayers avoid having the tax lien reported to the three consumer credit agencies.

The last option is the Offer in Compromise, or OIC, program. In the OIC program, taxpayers may be able to settle their debt for something less than they owe. The taxpayer makes an offer based on the value of the assets they can liquidate to use to pay off the debt. The IRS will consider the taxpayer’s ability to pay, their current income and expenses, and any asset equity in determining what they believe the taxpayer can reasonably repay. An OIC must be negotiated with the IRS and can take many months to obtain, so you may want the help of a tax professional to guide you through the requirements and negotiate with the IRS on your behalf. Even then, only some taxpayers will succeed in settling their debt for a lesser amount, and their assets will be reduced significantly if the IRS accepts the offer.

Of course, there are some additional conditions that you must meet in order to qualify for the Fresh Start program. First, you must be current on all your tax return filings, including prior years. You cannot apply for the Fresh Start program if you have any unfiled returns, and you must file timely returns for any future years.

Dealing with the IRS collections department can be a scary idea for many taxpayers, but you don’t have to face the IRS alone. If you aren’t certain what Fresh Start program is the best solution to your unique tax debt problem, you should consult a professional for advice and guidance. TaxAudit offers a comprehensive list of affordable assistance options, and you can find more information on those at our website here.

Whether you decide to tackle your tax debt solution on your own, or want the assistance of a professional, taking action now is your best step forward. Tax problems do not go away on their own and can add a considerable amount of stress to your life and relationships with loved ones. With the Fresh Start program, you know that you are working toward eliminating this burden.

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Carolyn Richardson, EA, MBA
Learning Content Managing Editor


Carolyn has been in the tax field since 1984, when she went to work at the IRS as a Revenue Agent. Carolyn taught many classes at the IRS on both tax law changes and new hire training. In 1990, she left the IRS for a position at CCH, where she was a developer on both the service bureau software and on the Prosystevm fx tax preparation software for nearly 17 years. After leaving CCH she worked at several Los Angeles-based CPA firms before starting at TaxAudit as an Audit Representative in 2009. Carolyn became the manager of the Education and Research Department in 2011, developing course materials for the company and overseeing the research requests. Currently, she is the Learning Content Managing Editor. 


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