The Fresh Start Program

The Fresh Start Program, or the Fresh Start Initiative, was created in 2011 by the United States Federal Government. The Fresh Start Initiative Program provides tax relief to select taxpayers who owe money to the IRS. It is a response by the Federal Government to the predatory practices of the IRS, who use compound interest and financial penalties to punish taxpayers with outstanding tax debt.

The IRS Fresh Start tax program can help taxpayers who owe much more than they can reasonably afford to pay. Taxpayers who apply and are considered eligible can significantly reduce their federal tax debt; in some circumstances, they may be able to reduce 90% or more of what they owe.

For some taxpayers, the Fresh Start Program is their best chance to reduce tax debt. It was designed to help taxpayers stuck in debt reduce the amount they owe, so they can get back on track with their tax payments and begin to plan for their financial future.

Learning about the requirements and application process to see if you qualify for Fresh Start tax relief can help save you months or even years of payments to the IRS, giving you the opportunity to use that money to support your family, start a business, complete your education, or improve your community.

What is the Fresh Start Initiative, and is it the Same as the IRS Fresh Start Program?

Although the different names may understandably cause confusion for some, the IRS Fresh Start Initiative is the same as the Fresh Start Program, or the Fresh Start Tax Relief Program. The Federal Government created the program, but the IRS is obligated to offer it to eligible American taxpayers who have current tax debt. This is why it is referred to as 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. This taxpayer may also be out of work, and barely able to afford utilities and living expenses. They do not have the means to pay the IRS $15,000, and most likely, they will never have the means to repay the IRS the amount they owe.

The Fresh Start Program mandates that the IRS cannot collect more than a taxpayer can pay. This helps the taxpayer reach an agreement with the IRS, and allows the taxpayer to pay an amount they can reasonably afford. The financial situation of the taxpayer is the IRS’s primary criteria for evaluation.

The taxpayer may have to fill out a form on the IRS website, call or email an IRS representative, or make an appointment to visit their local IRS office to determine eligibility before they are approved. Once they submit the application, and it is received and processed by the IRS, they will find out if they qualify for Fresh Start tax relief. After approval, the taxpayer will find out what the new amount of their payment will be.

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 the debt is paid in full.

Once you are on an installment plan, you will no longer receive IRS collection letters or be susceptible to penalties. This plan is also a great way to show 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, even if the amount you are required to pay monthly changes under the Fresh Start Program. With the ability of the IRS to include interest in your outstanding account amount, you will end up paying more than you originally owed.

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 professional tax relief company to represent you on your behalf.

Offer in Compromise

An IRS Fresh Start Program Offer in Compromise, or 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 to reduce your tax debt through the Fresh Start Program, the qualifications are strict. This method is reserved only for taxpayers who are in difficult economic situations, and do not have the financial resources to pay off their federal tax debt in full. Due to the strict 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 skillful understanding of the IRS Fresh Start Program qualifications, and will not be bullied or tricked by the IRS into a less-than-optimal resolution.

Please refer to our “How to Avoid Tax Relief Scams” section to ensure that you stay away from fraudulent tax resolution companies in your search for professional tax relief representation. These companies will promise you an OIC without first analyzing your specific tax situation and preparing the necessary forms for the IRS. The IRS is the ONLY entity that can approve of an Offer in Compromise.

The right tax relief company will be transparent about their process, experienced in negotiating with the IRS and getting results for their clients, and will center their strategies around you and your financial needs.

Currently Non-Collectible Status

Unlike the other three Fresh Start tax programs, Currently Non-Collectible Status is just that: a “status” rather than a form of Fresh Start tax relief. The IRS reserves the right to 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 in more detail 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 attempt to get you to agree to terms that are more favorable for them.

Additionally, once the time period of your Currently Non-Collectible Status ends, the IRS will begin again in their efforts to collect on payments, and those phone calls and letters threatening penalties will continue. A tax relief company can help you stay in Currently Non-Collectible Status for as long as possible, and 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. Penalty Abatement can be considered a form of Fresh Start tax relief. However, the IRS will only apply Penalty Abatement for a reasonable cause.

You can request Penalty Abatement at any level of IRS collections: by visiting a federal IRS campus, through an automated collection system, or by speaking to personnel at local IRS offices. Keep in mind that a local IRS office can only grant a Penalty Abatement of up to $100. Requesting Penalty Abatement is free.

How to Apply for the IRS Fresh Start Program

The IRS will not accept a request for tax relief through any of the programs in 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/medical statements, fire department reports, insurance claims, student loan statements, or death certificates of family members. We would also advise including a letter with your Form 843 explaining your personal situation and why you are unable to pay your outstanding tax debt.

In order to meet the additional requirements to obtain tax relief through the Fresh Start Program, you must file all of your missing or unfiled tax returns, your estimated tax payments must be current, and your current withholdings must be correct. Finally, all filings for the last six months must be current or correct.

The best way to prevent your request from being denied is to contact a professional tax relief company. Even if you get denied by the IRS, a tax relief company can help you file a letter of appeal.

What Are the IRS Fresh Start Program Qualifications?

Tax relief through the federal Fresh Start Program is only possible for those who 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.

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

The IRS Fresh Start Initiative Program 2021

The Fresh Start Program expanded in 2012, shortly after its creation, so that more taxpayers could apply for tax relief. The most relevant change to the program is that now, when the IRS considers 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 recent years.

In 2020, the Fresh Start Tax Program saw record numbers of qualifications. The large increase in accepted offers for Fresh Start tax relief, and the IRS’ leniency for approving cases, was due primarily to the COVID-19 pandemic, which resulted in financial hardship for millions of Americans.

However, plenty of taxpayers are still experiencing financial hardships in 2021, especially students, parents, and small-business owners. Tax experts predict that the IRS Fresh Start Program qualifications could remain loose for a little while longer, but it is unlikely the IRS will continue to relax their strict application requirements for an extended period of time.

The best way to know if you qualify for tax debt relief in 2021 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 (888) 421-9283.

To find more information on TaxWave services, and to learn about updates on the IRS Fresh Start Program for 2021, visit our blog, click the site menu to read client success stories, or follow us on Facebook and Twitter!

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