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What is the IRS Fresh Start Program?

Man Freeing Himself from Tax Debt

What is the IRS Fresh Start Program?

If you’re dealing with tax debt, you may worry that you’re never going to get ahead. How do you settle your debt without incurring interest, penalties or more debt? The IRS Fresh Start Program could help you affordably pay off what you owe the IRS.

What Is the Fresh Start Initiative?

The IRS began Fresh Start in 2011 to help struggling taxpayers by allowing them to pay off substantial tax debts at an affordable rate over the course of up to six years. Payments are based on the taxpayer’s current income and the value of their liquid assets.

The Fresh Start Initiative program can also help taxpayers reduce interest and penalties and avoid tax liens, and other detriments often associated with owing tax debt to the IRS. The Fresh Start Initiative works by:

  • Raising the dollar amount that triggered Federal Tax Liens (FTL)
  • Making FTL releases easier to obtain once debt was paid
  • Withdrawing FTLs more frequently for taxpayers who participated in Direct Debit Installment Agreement (DDIA).
  • Making it easier for small businesses to obtain Installment Agreements (IAs)
  • Streamlining and expanding Offer-In-Compromise (OIC) program qualifications

Changes to The Program

The program was expanded to help a greater number of taxpayers by adopting some more flexible Offer-in-Compromise terms that more closely reflect real-world situations. It took circumstances like the hardships faced by people who experience unemployment into consideration, allowing taxpayers who are unemployed for longer than 30 days a chance to have their IRS penalties waived and the ability to apply for a six-month extension to file and pay taxes penalty free. The expansion enabled some of the most financially distressed taxpayers to clear up their tax problems, possibly more quickly than in the past. In certain circumstances, the changes include:

  • Revising the calculation for the taxpayer’s future income
  • Allowing taxpayers to repay their student loans
  • Allowing taxpayers to pay state and local delinquent taxes
  • Expanding the Allowable Living Expense allowance category and amount

Other changes to the program include narrowed parameters and clarification of when a dissipated asset will be included in the calculation of reasonable collection potential. In addition, equity in income producing assets generally will not be included in the calculation of reasonable collection potential for on-going businesses.

Who Qualifies for The Fresh Start Program?

Both businesses and individual taxpayers are eligible for the program under certain circumstances.

For an individual taxpayer to qualify for the Fresh Start Program they must:

  • Owe less than $50,000 in tax debt or have the ability to pay a larger liability down to that amount
  • Be able to pay off the debt within 72 months
  • Have never have fallen behind on IRS tax payments before
  • Agree to the direct payment installments
  • Have all tax filings up-to-date through the most current tax year
  • Maintain the installment agreement, stay current with all tax filings, and do not incur any new tax debt during the period in which the installment agreement is in effect
  • If filing for an OIC, be able to pay the agreed settlement amount off within 12 months

For a business to qualify for the Fresh Start program they must:

  • Owe less than $25,000 and be paid in full within 34 months
  • Be current with federal tax filings and payments.
  • Have never fallen behind on tax payments with the IRS before

To Apply for the Fresh Start Program

The Fresh Start Program can help you pay back a substantial tax debt without putting undue hardship on your finances. You can apply to enroll in the Fresh Start Program online at IRS.gov or by filling out and submitting IRS Form 9465, which can also be found on IRS.gov

Enrolling in the program can be a bit complicated. If you are feeling overwhelmed or have any questions about enrolling, you may want to consult with a tax professional first. Working with a tax expert will ensure you’ve not only enrolled successfully but that it’s the right option for you and your tax situation. We can help you through the entire process from verifying that you qualify to disclosing the requested information, we can also help you choose the right repayment option. If you owe back taxes and are looking for a fresh start, give us a call at (320) 327-8409 today to talk Tyler Jones or send us a question online for a no-obligation tax consultation.