If you’ve fallen behind on taxes, you probably already know how quickly the notices from the IRS stack up and how fast the penalties grow. Many taxpayers find themselves buried in tax debt they can’t afford yearly, and the pressure only worsens with time. To ease this burden, the IRS introduced a solution called the Fresh Start Program to help taxpayers who are unable to resolve their tax debt due to extreme financial hardship.
To qualify for the IRS Fresh Start Program, you must meet the necessary requirements based on your income, tax filing history, and total IRS tax debt. The program includes options like partial pay installment plans, offers in Compromise, penalty abatement, and much more. However, each of the relief options has its own specific criteria, so choosing the right option depends on your eligibility and financial situation.
At Victory Tax Lawyers, we have licensed tax professionals that help taxpayers resolve their tax debt by making sure they qualify for the IRS Fresh Start Program. So, if you’re not sure which tax relief option is the best option for you or need professional guidance throughout the application process, we’re here to guide you from start to finish. Schedule a free tax attorney consultation now to get started.
This guide will walk you through the IRS Fresh Start Program qualification criteria. We’ll also cover how the tax relief options in this initiative works, what to do if your application is denied, and how to boost your chances of getting approved for the IRS Fresh Start Program.
What Is the IRS Fresh Start Program?
The IRS Fresh Start Program, also known as the Fresh Start Initiative, is a tax relief initiative set in place by the Internal Revenue Service to help taxpayers who are unable to pay their tax debt.
When it initially launched in 2011, the initiative aimed at helping individuals avoid IRS liens and qualify for installment agreements. Over time, the IRS has expanded the program to offer more flexible terms and eligibility requirements. Eligible taxpayers can now access a collection of IRS debt relief options to reduce the taxes owed, pause collection activity, and help them avoid any form of penalty.
It will also interest you to know that the IRS Fresh Start Initiative is not one single solution. Instead, it’s a collection of tax relief options grouped together to make it easier for taxpayers to resolve back taxes. The key features of this program include:
Streamlined Installment Agreements
These agreements enable qualified taxpayers to set up manageable monthly payment plans without having to supply detailed financial information. The IRS uses a more simplified review process to quickly get you into a plan, often allowing terms of up to 72 months with timely payments.
Offer in Compromise (OIC)
Offer in Compromise gives taxpayers the liberty to settle tax debt for a lesser amount than what they owe. Not every applicant may qualify for this tax relief option. While this tax relief option is not available for everyone, those facing extreme financial hardship may find that an OIC provides a fresh start in its truest sense. This helps by cutting down their tax burden to a large extent.
Penalty Abatement
The IRS imposes steep penalties for late tax filings, late payments, and other tax compliance issues. However, taxpayers may qualify for penalty abatement under the Fresh Start Program. Generally, this feature implies that every IRS penalty, like failure to file, failure to pay, and failure to deposit, will be removed from the taxpayer’s debt.
Aside from individual taxpayers, small and medium-sized businesses (SMBs) may qualify for penalty abatement if they have a history of good compliance and can show reasonable cause for falling behind on their tax. This is a good option for businesses that may have been hit by unexpected setbacks.
Higher Tax Lien Thresholds
Another feature of the Fresh Start program is raising the thresholds for when the IRS issues federal tax liens. Before the IRS Fresh Start initiative, a lien could be filed for as little as $5,000 in tax debt. Now, that threshold is generally set at $10,000.
Currently Not Collectible (CNC) Status
Currently, the Not Collectible (CNC) status is available to taxpayers who cannot afford to pay their IRS tax debt without having to risk their basic living expenses. While the tax debt still doesn’t disappear after qualifying for this relief option, you still need to pay taxes while the IRS puts a temporary pause on all collection actions. In essence, interest and penalties may also continue to accrue. However, enforcement action stops. With this feature, taxpayers have the time and space they need to improve their situation and establish a consistent payment history without the pressure of levies or wage garnishments.
Benefits of the IRS Fresh Start Program
The IRS Fresh Start Program reduces financial pressure, stops collection actions, and creates long-term compliance pathways. Here’s a breakdown of the benefits you can get:
- Reduces Your Overall Liability: The IRS Fresh Start Program reduces the total tax debt you owe drastically
- Offers Manageable Repayment: It allows you to pay off your tax bill using a flexible and affordable payment plan
- Stops Enforcement Actions: The program halts IRS collection actions like wage garnishment, tax liens, and levies
- Supports Small Business Recovery: Both self-employed individuals and small businesses have a chance to clear tax debts without shutting down operations
- Gives Room for Long Lasting Compliance: The program improves long-term tax compliance by setting up terms that align with your financial situation.
- Restores Peace of Mind: It also helps to restore a financial breathing space so you can focus on recovery, not collection threats from the IRS
Who Qualifies for the Fresh Start Program With the IRS?
To qualify for the IRS Fresh Start Program, taxpayers must show eligibility by meeting the expected requirements. You must owe $50,000 or less in total tax debt, be fully up-to-date on filing your federal tax returns, and comply with current IRS regulations. These three factors form the eligibility baseline before any taxpayer can begin to apply for the IRS Fresh Start program’s relief options.
1. You Must Owe $50,000 or Less in Total Tax Debt
Your total tax liability must be $50,000 or less as part of the qualification process. For taxpayers owing higher debts, relief options may still exist, but they involve different forms of negotiation, like non-streamlined installment agreements or more extensive documentation.
2. You Must Be Up-to-Date with Filing Tax Returns
Another eligibility requirement is full tax return compliance. This implies that all of your prior tax returns must be filed and received by the IRS before consideration for any form of tax relief. If you have missing returns even for a single year, you may not be eligible for the Fresh Start Program by the IRS.
If you’re also not certain whether you’ve filed everything or you need to re-file due to possible errors, review your tax filings and make the necessary adjustments before applying. Many applicants who think they are eligible for Fresh Start Initiative benefits are rejected because they overlooked a late return or failed to submit current-year filings.
3. You Must Comply with IRS Regulations
Being up to date with Filing tax returns and having $50,000 or lesser as your tax balance are parts of staying compliant. However, the IRS also expects you, the taxpayer, to cooperate throughout the entire process and avoid accumulating new IRS debts while your request is under review. This includes:
- Responding to IRS notices in a timely manner
- Making the required estimated tax payments (especially for self-employed individuals)
- Avoiding new tax delinquencies while your relief plan is being considered
If you apply for tax relief but continue to accrue new liabilities or ignore IRS correspondence, your application may be delayed, denied, or revoked. This will also happen even after your request has been initially granted.
Beyond the basic qualification requirements, specific qualifications for the IRS Tax Relief Program also include:
Who Qualifies for an IRS Installment Agreement?
Your total tax debt must not exceed $50,000 to qualify for a streamlined installment agreement. You must also align with the IRS requirement to pay off your total debt within 72 months.
Another factor in qualifying for the program is how you plan to make your monthly payments. The IRS prefers that all payments be made via a direct debit arrangement from your bank account to eliminate the risk of missed or late payments. In fact, if you opt for a direct debit installment agreement and make three consecutive monthly payments on time, you may also be eligible to request a tax lien withdrawal under certain conditions.
Who Qualifies for an Offer in Compromise (OIC)?
To qualify for an Offer in Compromise, you must demonstrate to the IRS that, even if you choose to liquidate your assets or maximize your income, you still wouldn’t be able to cover the full debt without affecting your basic living expenses.
The IRS uses a detailed financial analysis before approval. They review your income, expenses, asset equity, and future earning potential. This analysis is calculated using Form 646 and Form 433-A(for individuals) or Form 433-B(for businesses). Each of these forms requires comprehensive documentation, which includes pay stubs, bank statements, monthly expenses, and asset valuations.
Who Qualifies for Penalty Abatement?
Penalty abatement is mostly made available to taxpayers who have incurred IRS penalties due to reasonable cause and not by willful neglect. This includes natural disasters, illness, death in the family, or other unexpected hardships.
For example, if you were hospitalized and not able to handle your tax affairs during the filing season, that is a reasonable cause. Similarly, if you lost important tax records in a fire or flood or were caring for an ill dependent, these circumstances could support your request for tax relief.
Who Qualifies for a Tax Lien Withdrawal?
A tax lien withdrawal takes off the IRS’s legal claim against your property and informs creditors that you’ve taken the necessary steps to resolve your tax debt or are working with the IRS actively to do so. To be eligible for a tax lien withdrawal, you must:
- Owe $25,000 or less
- Enter into a direct debit installment agreement
- Make three consecutive on-time payments
- Stay compliant with all current tax obligations
Also, bear in mind that a tax lien withdrawal is not the same as a lien release. A lien release removes the public Notice of Federal Tax Lien (NFTL) after the debt is paid, while a withdrawal effectively erases the notice from public records as if it was never filed
Who Qualifies for Currently Not Collectible (CNC) Status?
If your financial situation is so serious that even small payments aren’t possible, you may qualify for Currently Not Collectible (CNC) status. This status temporarily suspends IRS collection efforts such as wage garnishment or bank levies.
To qualify for this tax relief option, you must provide complete proof that your necessary living expenses exceed your income. The IRS uses its Collection Financial Standards to assess what it deems allowable. Your actual expenses will be compared with whatever the IRS considers reasonable for food, housing, transportation, and other necessities. Once the IRS deems your actual expenses excessive or unverified, your CNC request will most likely be declined.
Exceptions and Special Cases for IRS Fresh Start Initiative
While the IRS Fresh Start Program provides clear guidelines for qualifying individuals, exceptions and special cases exist for self-employed taxpayers and individuals already facing a federal tax lien. If you fall into any of these groups, you may still be eligible to apply for the Fresh Start initiative as long as you’ve met the required IRS criteria.
Self-Employed Taxpayers May Still Qualify
The IRS is aware that self-employment income often fluctuates, so they offer adjusted qualifications for self-employed applicants. To be considered, your total tax debt must be $50,000 or less. You’ll also need to provide proof of steady income, even if there’s a month-to-month variation. This includes submitting IRS Form 433-A (Collection Information Statement), which should contain your business income, expenses, and assets.
Tax Liens Don’t Disqualify You Automatically
The IRS files a tax lien when the amount owed exceeds $10,000. However, if your total debt is below $25,000 and you enter into a Direct Debit Installment Agreement, you may be eligible to request a lien withdrawal under the Fresh Start initiative.
Additionally, the longer a tax lien stays on your record, the more damage it can do to your credit, your ability to sell property, or when applying for financing. So, it’s best to start your application process early enough.
How to Apply for the IRS Fresh Start Program
Applying for the IRS Fresh Start Program kicks off with adequate preparation. You must gather the necessary documents, submit a complete application, and consult a tax attorney for proper guidance. To get the best shot at approval, understand the following steps before you begin:
Gather Your Financial Documents
The first step in applying for the IRS Fresh Start Program is simple: get your financial records in order. The IRS requires an accurate picture of your financial situation, so you must assemble your most recent tax return, proof of income, bank statements, and business income (if you are self-employed).
Consult a Tax Attorney for Guidance
Once your documents are together, go ahead to consult a tax attorney. The Fresh Start Program isn’t one-size-fits-all, and your eligibility is dependent on the type of relief you need and your current financial condition. A tax attorney can help you:
- Determine which relief option best suits your situation.
- Review your documentation for errors or inconsistencies.
- Draft persuasive financial statements or hardship letters.
- Communicate directly with the IRS on your behalf.
- Reduce the risk of delays, denials, or further enforcement action.
At Victory Tax Lawyers, we’ve helped different taxpayers navigate the IRS Fresh Start Program with overall confidence. We’ll walk you through the entire application process. So, if you’re ready to speak with a licensed attorney who understands your rights and options, schedule a free attorney consultation.
Submit Your Application
Once you’ve identified the relief program you qualify for, the next thing to do is apply. Depending on your preferred option, submit your forms online using the IRS’s official portal or by mailing paper documents directly. Follow all instructions on each form carefully, as any minor errors or omissions can delay your application or trigger a rejection.
If you’re applying for penalty relief, you must also write an IRS penalty abatement letter that explains why you deserve relief in a clear and compelling manner. A tax attorney can also help phrase your letter to make sure it aligns with IRS expectations, so you don’t have to do this all by yourself.
Monitor Your Application Status
After submission, your job isn’t done yet. The waiting period begins. Most Fresh Start Program applications take about 4–6 weeks to process. However, this timeframe may vary based on the IRS backlog and the complexity of your case. During this period, you can:
- Use the IRS Online Portal: Log into your IRS account to track your status and view messages.
- Contact the IRS: Call the IRS directly if you haven’t received updates after 6 weeks. Also, get your application number, Social Security Number (or Tax ID), and case information before you place the call.
- Watch for Notifications: The IRS may send letters, notices, or additional requests for clarification. Once they do so, respond quickly to avoid delays.
Monitoring your application status shows the IRS that you’re serious and cooperative. It also protects you from missing any deadlines or follow-up requests.
What to Do if Your IRS Fresh Start Application Is Denied
If your IRS Fresh Start application is denied, thoroughly review your documentation, eligibility status, and the relief option you’ve applied for. While the IRS approves many applicants for the program, denials also occur.
Reasons Why the Internal Revenue Service May Deny Your Application
The most common reason the IRS denies Fresh Start applications is insufficient documentation. If you don’t provide complete and accurate financial records, the IRS will be unable to verify your eligibility, leading to immediate rejection.
Another issue that occurs frequently is failing to meet the program’s core eligibility requirements. For example, if your tax debt exceeds $50,000 or you haven’t filed all your past due tax returns, you will automatically be disqualified from most Fresh Start relief programs. Moreover, in the case where an Offer in Compromise (OIC) is denied, this could be because the IRS believes you can pay your full debt either through current income or liquidating assets.
What Are Your Options After Facing Application Denial?
An application denial from the IRS Fresh Start Initiative doesn’t necessarily imply you’re disqualified. You can decide to appeal the IRS decision by submitting a written request for a review and any missing documentation or additional details that might support your case.
Another option is to repeat the application process with a stronger application. If your previous submission didn’t contain enough detail or failed to demonstrate financial hardship, regroup with a tax professional and submit a revised application that’s more likely to succeed. Depending on your situation, also explore other relief programs within the IRS Fresh Start initiative.
How to Boost Your Chances of Qualifying for IRS Fresh Start
To increase your chances of qualifying for the IRS Fresh Start Program, remain compliant with the IRS, organize your finances, and submit complete yet accurate documentation. Below are ways to increase your chances of approval in detail:
Submit Complete and Accurate Documentation
The foundation of any successful Fresh Start application is complete documentation. The IRS cannot assess your eligibility without complete, accurate records. This requires you to submit up-to-date tax returns, W-2s or 1099s, bank statements, proof of income, and a detailed accounting of your expenses.
Consult a Tax Attorney or Professional
While the IRS enables you to apply independently, working with a qualified tax attorney boosts your chances of success. A tax attorney or professional understands how to properly categorize your expenses and represent your hardship. They also make sure that your application is correctly filled out and submitted at the appropriate time.
File All Outstanding Tax Returns
One of the most important yet overlooked disqualifiers for the Fresh Start Program is failure to file all prior tax returns. The IRS will not consider any application if your records are not current. Before you proceed to submit your application, make sure every outstanding tax year has been filed, even if you can’t afford to pay the amount due.
Demonstrate Financial Hardship
Suppose you are pursuing an Offer in Compromise (OIC) or Currently Not Collectible (CNC) status. In that case, you must show proof that paying the entire tax liability would create an undue financial burden.
To strengthen your case, provide a detailed breakdown of your expenses from rent, mortgage, and medical bills to utilities, and include all the necessary documentation. Also, keep in mind that the IRS will definitely review every claim you make. So, the more realistic and verifiable your hardship appears, the better your chances of being approved.
Stay Compliant Throughout the Application Process
Finally, staying responsive and compliant during the application review process is important. Respond quickly and provide the exact documents or clarifications if the IRS requests more information from you. Ignoring follow-up requests can cause unnecessary delays or denials, even if your original application was strong.
Need a Tax Lawyer to Help with the IRS Fresh Start Program?
The IRS Fresh Start Program could be your lifeline if you’re drowning in unpaid taxes and not sure how to go about it due to your financial situation. To qualify, you’ll need to meet specific requirements like owing $50,000 or less, filing all your tax returns, and showing that you can’t pay the full amount comfortably.
Meeting these requirements is only a fragment of the qualification process. How you present your financials, structure your application, and respond to IRS requests can also influence your approval. So, you should work with a tax attorney who has a full understanding of how the IRS evaluates these cases.
At Victory Tax Lawyers, our tax attorneys know what the IRS looks for and how to position your case for the best possible outcome. Schedule a free consultation now and see how we can help you take full advantage of what the IRS Fresh Start Program offers.
Frequently Asked Questions
Can I Apply for the IRS Fresh Start Program if I Have Multiple Years of Tax Debt?
Yes, you can apply. Just make sure that all your past tax returns are filed during your application process. Also, you must meet the eligibility criteria for the relief option you’re applying for.
How Long Does IRS Fresh Start Approval Take?
Approval usually takes 4 to 6 weeks, but complex cases may take longer depending on the program and documentation submitted.
Can I Apply for the Fresh Start Program Myself?
Yes, you can. However, working with a tax professional is a better option to help you avoid mistakes, improve your chances, and make sure you choose the best option.
