The IRS Fresh Start Program: 2023 Updates
Last updated: May 2023
Key takeaways:
The IRS Fresh Start Program is designed to offer those who haven’t had an adverse history with the IRS an opportunity to make payments based on given criteria.
The IRS Fresh Start Program aids in tax relief through four main program options, such as installment agreements, offer in compromise, currently not-collectible status, and penalty abatement.
You must provide thorough financial documentation and be up-to-date on all tax filings to qualify for the IRS Fresh Start Program.
TABLE OF CONTENTS:
What Is The IRS Fresh Start Program?
How Does The IRS Fresh Start Program Work Today?
Installment Agreements
Offer In Compromise (OIC)
Currently Not Collectible Status
Penalty Abatement
The Four Programs for the IRS Fresh Start program
How Do I Apply?
Qualifications For The IRS Fresh Start Program
Frequently Asked Questions
What Is The IRS Fresh Start Program?
The IRS Fresh Start Program is a variety of initiatives that helps struggling taxpayers reduce their tax debt and receive a “fresh start” through the implementation of tax relief procedures such as debt settlement, payment plans, first-time penalty waivers, and the temporary delay of tax collections.
Taxpayers who owe tax liabilities to the IRS but are struggling to pay what they owe while still affording their basic living expenses can benefit from the tax relief initiatives offered by the IRS Fresh Start Initiative that help them reduce their tax debt in a way that is manageable based on their financial situation.
There are four main tax debt relief programs within the IRS Fresh Start Initiative, each with unique qualification requirements. These are:
- Offer in Compromise
- Installment Agreements
- Currently Non-Collectible Status
- Penalty Abatements
These pillars of the IRS Fresh Start Program support the goal of relieving taxpayers from the burden of tax collection strategies used by the Federal Government to punish individuals and small businesses with outstanding tax debts, such as financial penalties and tax liens.
We’ll provide you with as much information as possible to see if the fresh start program is for you. Let’s take a deeper dive into the details.
How Does The IRS Fresh Start Program Work Today?
The Fresh Start Initiative Program has become a popular option for tax relief among Americans, especially since the new expansion in 2012 that expanded the qualification parameters so that more taxpayers could apply and qualify for tax relief.
For example, the IRS doubled the threshold required for the IRS to file a notice of a federal tax lien. Therefore, the IRS Fresh Start Initiative allows for a more graceful approach to achieving tax debt relief while avoiding a tax lien or levy.
The Fresh Start tax program has historically received a high number of applications, and the economic hardships inflicted on many families during the COVID-19 pandemic amplified this trend, as shown by the record number of applications during 2020.
Many taxpayers still struggle with their tax returns and financial woes as the pandemic winds down and inflation continues, but now that it is 2023, the trend of lenient guidelines is expected to eventually come to an end. For this reason, individuals experiencing tax problems should reach out to a tax relief company as soon as possible to take advantage of the IRS Fresh Start Program.
The Four Relief Programs for the IRS Fresh Start program:
Let’s review the four relief types available through the IRS Fresh Start Program and discuss the eligibility requirements.
Installment Agreements
As part of the fresh start that the IRS offers, installment agreements give qualified individuals the ability to make affordable monthly payments to the IRS as a method of helping them pay their taxes.
These affordable payments are applied directly to reducing the determined tax debt until payments are fully paid. The other good news is that once you are set up with installment payments under an installment agreement, you will no longer receive those nasty IRS collection letters.
However, the IRS can and will still charge you interest on the amount of tax debt you owe. After making your third direct debit installment agreement payment and your tax debt balance is below or drops below $25,000, you will be in a better position to prevent or help remove federal tax liens or a tax levy.
You must keep up with your monthly direct debit payments once you have an affordable extended payment plan established. The installment agreement for tax relief is considered the most popular fresh start program out of the entire IRS fresh start initiative.
Offer in Compromise (OIC)
Another option, such as the Offer in Compromise, also known as an OIC, permits qualified taxpayers to make a settlement based on a reduced amount that the IRS will accept in place of payment in full on owed tax debts.
The ability to qualify for the OIC program is your best-case scenario for tax repayment options, as you can reduce your debt and ease your financial situation. However, eligibility guidelines for this method of tax debt reduction are stringent and saved for debt cases.
Currently Not Collectible Status
Currently Not Collectible Status, also known as IRS Hardship Status, essentially lets taxpayers place their payments on hold while in financial hardship. If you can prove that paying your living expenses along with paying your back taxes will cause financial hardship, you may be eligible.
Currently Not Collectible doesn’t forgive your tax debt but rather delays payments until you’re back on your feet and can afford to pay.
If approved, the taxpayer will be placed in an uncollectible status, and the IRS must immediately stop collection actions and release any existing levies on assets. During this process, the IRS may file federal tax liens in case you fail to pay and collect interest on the outstanding amount.
What about future refunds?
The IRS will take any future refunds to pay the outstanding debt owed unless the taxpayer can prove the refund is necessary for living expenses.
Penalty Abatement
If you have significant penalties with the IRS, there is a chance you could be eligible for the IRS fresh start penalty relief. When a taxpayer fails to file or fails to pay their taxes, they can accrue penalties that increase the debt that they must repay.
As a form of tax relief, the final Fresh Start program offering is known as “Penalty Abatement.” If the IRS determines that you meet a strict set of requirements, they may absolve you of the penalties associated with your tax bill of up to $100.
How Do I Apply For The IRS Fresh Start Program?
Taxpayers must prove to the IRS that they cannot reasonably afford to pay their tax debt by gathering specific supporting documentation to use as evidence regarding the state of their financial situation.
The documentation you may be asked to provide during the beginning stages of the application process can include but is not limited to:
- Student loan statements
- Insurance claims
- Medical records and doctor statements
- Birth/Death certificates of immediate family members
- A personal letter of explanation as to your situation
Finally, your tax filing must be up to date before you can qualify to reap the benefits of the Fresh Start initiative. This means that in order to get a fresh start, you must complete your unfiled tax returns or incomplete tax returns and ensure your current withholdings and estimated tax payments are correct.
Who Qualifies for the IRS Fresh Start Program?
To be considered eligible for the fresh start program, you must meet the following criteria:
As a sole proprietor, your income has dropped by 25%.
Your annual income is below $100,000. (single)
Your annual income is below $200,000 (married).
You owe less than $50,000 in tax debt.
- You have a clean history with zero missed payments to the IRS.
A Collection Information Statement such as Form 433 is a type of financial documentation detailing your income and expenses. The IRS uses this to determine your eligibility.
Frequently Asked Questions
What is the Timeline for the Program?
The proper timeline for the fresh start program is typically around 6-12 months. However, there are a few special cases resulting in a longer timeline.
What is the IRS Hardship Program?
The IRS hardship program is located within the Currently Not Collectible (Part 5. Chapter 16. Section 1). It states that taxpayers may qualify for a Currently Not Collectible if they cannot meet the necessary daily living expenses due to the collection of the liability.
Proving hardship requires the submission of financial information using one of the following Collection Information Statement forms:
- 433A
- 433F
- 433B
Is the program new?
The fresh start initiative isn’t new and has been around since 2011 to aid in the economic downturn for taxpayers. Since the beginning, the IRS has helped more than 1.7 million people settle their tax debt.
How much does the Program Cost?
The cost differs for each program depending on an individual’s circumstances. For example, a currently not collectible can defer your payments but accrue interest on your balance. If your goal is to reduce the total amount owed, an offer in compromise might be a better option.
It’s imperative to pick the program that best suits your financial situation.
What happens if I don't participate?
Consequences can be severe, resulting in various penalties and interest fees. Additionally, taxpayers could be subjected to wage garnishments and liens.
Is the program legitimate?
You’re probably questioning if the IRS Fresh Start Program is legit. The good news is that the program is 100% legitimate! The IRS has forgiven millions of Americans, giving them financial freedom from tax debt.
What percentage will the IRS settle for?
A non-refundable down payment of 20% of the total amount is what the IRS will typically require before consideration. The amount of settlement varies depending on a taxpayer’s financial status. This includes assets, income, and expenses.
Is the IRS Fresh Start Program and the Fresh Start Initiative the same thing?
Yes, the IRS Fresh Start Program and the Fresh Start Initiative are essentially the same.
Will the IRS Fresh Start Program hurt my credit?
The simple answer is no. The program is rather helpful in relieving tax liens against your assets. However, if a tax lien is claimed against you for not paying your IRS taxes, your credit may be in jeopardy.
Do you know a taxpayer who could benefit from an Offer In Compromise?
If you or someone you know feels they may benefit from the Fresh Start program, now is the time to get your documentation in order so that you can apply and take advantage of all this program offers. The process of finding a fresh start tax program for your situation can be confusing and overwhelming despite all that we have covered, which is why we’re here to help.
Don’t hesitate to reach out to us at: (877) 441-0013
Here at Ideal Tax, we provide professional guidance to people whose lives have been affected by tax issues. Our team of licensed enrolled agents, accountants, and tax law advocate attorneys can help evaluate your specific tax issue and determine if you qualify for tax relief and the IRS fresh start program, please contact us for a free consultation.