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What is the Fresh Start Initiative with the IRS?

What is the IRS fresh start initiative?

It's bad enough if you are in IRS tax debt, and you also have to pay extensive interest and extra fees. You eventually end up reeling in debt by not making any payments as you try to avoid paying interest and penalties.

Instead of going through all this, it's better to make use of the IRS Fresh Start Program. Curious to learn more about this? Read on!

What is the Fresh Start Initiative?

Unlike what you assumed, the Fresh Start Initiative isn't something new. It was started way back in 2011 with rules focusing on taxpayers with tax debt, but no federal tax liens against them.

The program was designed to give first-time tax offenders an opportunity to set things right. It lets taxpayers pay off their tax debts over six years through monthly payments decided based on how much they presently earn, and their liquid asset value. Most of the time they eventually clear off all their pending dues within 6 years' time.

The program basically helps make it easier for taxpayers to pay off their heavy tax debts by:

  • Increasing the amount triggering Federal Tax Liens (FTLs) from five to ten thousand dollars. It was later increased to twenty-five thousand dollars, which led to fewer FIL filings.
  • More frequent FIL withdrawals for taxpayers entering Direct Debit Installment Agreement
  • Easy FTL releases upon paying off debt
  • Easily obtained Installment Agreements for small businesses
  • Making it easier for taxpayers to use the Office-In-Compromise (OIC) program by streamlining and expanding its qualifications

The Fresh Start Initiative was further revised in 2012 to make it easily available to more taxpayers. These revisions included:

  • Increasing the different forms of expenses, and the amounts, (like student loans, various tax debts and affordable living expenses) that the IRS considered reasonable while deciding how much taxpayers could comfortably pay every month.
  • Simplifying the IRS's method of calculating a taxpayer's future income while considering OICs

These changes made the IRS realize why taxpayers struggled to pay bills. So though the program had their own formulas, the IRS also considered the realities people faced like unemployment, which made them fall back on their taxes.

People who qualify for the program

Taxpayers who qualify for the program are those ready to pay their tax debt through installments paid over a specific time span, and decided based on a repayment structure. The other requisites for qualification are:

  • Having IRS debt of fifty thousand dollars or less, or the ability to repay most of the amount.
  • Being able to repay the debt over a span of 5 years or less
  • Not having fallen behind on IRS tax payments before
  • Being ready to pay as per the direct payment structure
  • Being current with their tax filings for the present tax year
  • Agreeing to follow the installment agreement, be up-to-date about filing tax and not incurring any additional debt through the installment agreement's period.
  • Filing for, and paying the agreed amount for an OIC within a year

Eligible taxpayers for the Fresh Start Initiative stand to receive some bonus items:

  • They can withdraw a federal tax lien if their debt is less than twenty-five thousand or if they can pay a lower initial liability.
  • First-time taxpayers may have some of their penalties reduced

Besides, taxpayers who have been unemployed for more than a month stand a chance of their IRS penalties being overlooked. They can also ask for an additional grace period of 6 months to file and repay taxes without worrying about expensive IRS penalties.

While even business owners may initiate the program, it's possible only if:

  • The debt should be lower than twenty-five thousand, and they can repay it in 2 years 10 months' time.
  • They up-to-date with the payment of federal employment tax filings
  • The business has never fallen behind with IRS tax payments before
  • Sometimes some penalties may be reduced as part of their qualifying bonus

IRS Fresh Start Program Repayment Options

The program offers taxpayers with three repayment options to legally and satisfactorily clear their tax debts. It, in the process, helps them avoid future penalties and interests that can lead to financial problems.

1.     Extended installment agreement

This is the first available option designed for taxpayers owing the IRS fifty thousand dollars or less. They are given a maximum of 6 years to repay their debt without incurring any additional penalties or interest. There will also be no IRS additional fees to bear like tax liens, wage garnishments or risk their assets getting seized.

Most taxpayers use this option where the amount to be paid every month is decided based on the amount of money the taxpayer currently makes and their disposable assets' value.

The IRS calculates affordable payment amounts to ensure payments are promptly made without any financial problems.

2.     Offer in Compromise (OIC)

This is the second option that is rare, but possible for taxpayers to use to settle their IRS tax debt dues. In this case, the taxpayer offers to pay less than the amount owed, sometimes much lower than the actual debt amount.

It's important you make a reasonable offer reflecting your present financial situation if you plan to use an OIC to clear your debt. This is an uncommon option less used by taxpayers.

So it's safer if you hire a tax professional to fill forms, and basically help you prepare and submit your offer to the IRS on your behalf. Tax professionals will help you file the relevant IRS forms. They will also provide accurate reports of your finances to help get your OIC application quickly accepted.

3.     Tax lien withdrawal

This option is for taxpayers ready to pay the entire debt amount using direct debit repayment. In this case, the taxpayer can give written instructions to have the amount directly withdrawn from their accounts. Those who receive the withdrawal should preferably avoid reporting it to the credit bureaus.

Applying for the IRS Fresh Start program

Those applying for the IRS Fresh Start Program have to follow the IRS established guidelines for all past and existing tax returns. You can't request for a repayment option if you have any pending tax returns that haven't been filed. It's also necessary that you are prompt in filing all future returns to be able to enroll in the Fresh Start Program.

It's only after filing tax returns that you can go to the IRS gov to get yourself enrolled using the Online Payment Agreement tool. The tool lets you choose your preferred repayment option.

If you don't want an online enrolment, you can always make a proposal for the IRS Fresh Start Program by filling and submitting an IRS Form 9465 that's available on IRS gov.

Once again, the Fresh Start Program helps you pay off your tax debt in an affordable manner, without the risk of going into debt. However as it can be a complicated procedure, with some things difficult to understand, it's always better to have a tax professional assist you in choosing and enrolling in the right program. 

They will help you file the requested IRS forms by disclosing only relevant information, and nothing that could be intimidating to you in the future. They will help you choose and apply for the best program based on your current income and financial position.


If you are facing this situation; call me TODAY for guidance

Matthew T. Desrochers, Esq.