The Fresh Start Program was an IRS initiative from 2011. The program made changes to the IRS’s collection process by reducing the threshold for issuing tax liens and making it easier to set up payment plans or settle tax bills through an offer in compromise. In 2024, taxpayers can still benefit from the terms of the Fresh Start initiative as well as from expansions that were added to the program.
In the following sections, we provide more details about the Fresh Start program and how to apply for relief if you have back taxes. We also outline how marketing companies use this phrase and explain why the IRS hasn’t really mentioned this program since it rolled out over a decade ago.
Key takeaways
- The Fresh Start Program was created in 2011.
- It helps taxpayers get out of tax debt more easily.
- In 2024, there are even more benefits for taxpayers.
- There is no single Fresh Start application.
- Instead, you apply for the relief program you need.
- Damien’s Law can help you take advantage of this initiative.
To talk more about the best relief options for your situation, contact us at Damien’s Law today. We can help you apply for IRS payment plans, penalty relief, and settlements so that you can reclaim your finances, protect your assets, and get back into compliance with the IRS.
What Is the IRS Fresh Start Program?
Implemented in 2011, the Fresh Start program is a series of changes the IRS made to its collection processes and payment plans. The agency lowered the debt threshold for issuing tax liens. The new rules also made it easier to get payment plans and allowed certain taxpayers to avoid tax liens by setting up payment plans. The program also streamlined the offer in compromise application process.
Fresh Start Changes in 2024
The 2011 Fresh Start program created permanent changes to the IRS’s rules, but since that time, the agency has made even more updates to help taxpayers. Take a look at the 2024 updates:
Tax Liens
The Fresh Start program increased the threshold for when the IRS issues tax liens. The press release from 2011 doesn’t indicate when the IRS will issue a tax lien, but as of 2024, the agency generally only issues federal tax liens if you owe $10,000 or more. The IRS also made it easier to get tax liens withdrawn if you pay in full or set up a qualifying payment plan as outlined below.
Installment Agreements With No Tax Liens
The original Fresh Start program ushered in a rule that the IRS would remove tax liens for people who set up installment agreements as long as they set up direct debit and owed $25,000 or less.
As of 2024, these limits are higher. Now, you can set up a direct debit payment plan on up to $50,000 in tax debt, and the IRS will remove tax liens.
You generally need to make three successful payments before the agency will remove the tax lien. Note that due to COVID, you may be able to avoid a tax lien on tax debt from 2019 even if it’s over the threshold.
The rules for small businesses are the same in 2024 as they were with the original Fresh Start. Namely, small businesses with up to $25,000 in unpaid taxes can avoid a tax lien if they set up a direct debit installment agreement to pay off their tax debt within 24 months. If you’re no longer in operation, you may be able to get a payment plan on a higher amount of tax debt.
Streamlined Offer in Compromise
In 2011, the IRS created a streamlined offer in compromise process for taxpayers with annual incomes up to $100,000 who owe $50,000 or less.
As of 2024, the IRS no longer has the phrase “streamlined offer in compromise” on its website, but the agency is willing to accept offers from people who have any level of tax debt as long as they establish that their settlement offer is the most they can afford to pay based on their current income and assets.
Additionally, before the Fresh Start program, taxpayers generally had to pay an offer in compromise in a lump sum. But now, you can take up to 24 months to pay off an offer in compromise.
Penalty Abatement
As part of the expanded Fresh Start initiative, the IRS offered to waive the failure-to-pay penalty for 2011 tax returns if you paid your tax bill by October 15, 2012. The penalty relief was specifically for couples who earned $100,000 or less for individuals and $200,000 or less for couples. It also only applied to people with tax balances of $100,000 or less.
As of 2024, this relief is no longer relevant, but the IRS offers first-time abatement and penalty relief for reasonable cause. Neither of these relief programs is affected by your income or your level of tax debt. No matter how much you earn or how much you owe, you may be able to get a penalty waiver if you normally pay on time or if you have extenuating circumstances that caused you to pay or file late.
How to Apply for Fresh Start
There is not a single Fresh Start application. In fact, when companies talk about applying for the Fresh Start program, they are using misleading language. There is no way to apply for the Fresh Start program, and if you call the IRS and ask about this “program”, they will tell you that it doesn’t exist. As explained above, it is just a collection of updates that the IRS made years ago.
Instead, you need to figure out the best relief option for your situation, and then, you need to apply for that program. In most cases, you will apply for penalty relief and then one of the other payment plans or relief options. Here’s an overview of how to apply:
- Penalty Relief – To request first-time or reasonable cause penalty relief, you can call the IRS, write a letter, or file Form 843. You may want to decide on the relief option you want before requesting penalty relief.
- Installment Agreement – If you owe less than $50,000 ($25,000 for businesses), you can apply for a payment plan on the IRS website. Otherwise, file Form 9465 or call the IRS. You may also need to share financial details with Form 433-F.
- Offer in Compromise – To apply for an offer in compromise, complete Booklet 656 which contains the offer application and the required financial disclosure forms. Be prepared to share complete information about your income, assets, debt, and expenses.
- Currently Not Collectible – If you cannot afford to pay anything, the IRS may mark your account as currently not collectible and stop all collection actions against you. There is no set form for the CNC program, but when you contact the IRS or a tax pro, they will let you know what you need to do.
How to Reduce Tax Debt and Penalties
The main draw of the Fresh Start program is that it can help you reduce your tax bill. Keep in mind, however, that as explained above, the Fresh Start program is not just designed to reduce your tax bill. It’s designed to make it easier for taxpayers to pay off their back taxes.
Big tax relief firms like to push the idea of tax forgiveness or zero-tax owed programs, but in reality, the majority of taxpayers do not qualify to reduce their taxes through an offer in compromise or another type of settlement program.
To ensure you select the best program for your needs, consider talking with a tax pro. If you can afford a payment plan, they can help you request penalty relief and set up payments. However, they can also let you know if a settlement option is better for your situation. Unfortunately, close to 20% of people who set up payments could have qualified for an offer in compromise or a partial payment installment agreement.
If a settlement is a better option for your situation, a tax pro can help you apply for an offer in compromise. They can also help you work the situation to your advantage by maximizing the allowable expenses in a way that improves your life and reduces how much you need to pay.
Requirements for Fresh Start
To qualify for any type of IRS payment plan or relief options, you must meet the following criteria:
- Filed all tax returns – if you’re years behind, the IRS generally only requires you to file the last six years.
- Submitted application forms – As noted above, every payment plan and relief option has its own application forms or processes.
- Completed required financial disclosures – You will need to share detailed info about your finances to get payment plans on over $50,000 in debt or to get your tax debt settled.
- Give up tax refunds – If you’re making payments, the IRS will keep your tax refunds and apply them to your bill. You will lose your refund the year you apply for an offer in compromise unless you prove financial hardship.
- Stay on top of filing requirements – With payment plans and offers in compromise, you must stay current on future tax filing and payment obligations. If you don’t, the IRS can put your payment plan into default or retroactively rescind your offer in compromise.
Talk with a tax pro or contact the IRS directly to learn more about the exact requirements for the program you want to use.
FAQs About the Fresh Start Program
Is the Fresh Start Program Legitimate?
Yes, there really is a Fresh Start program, but marketing companies use this phrase very inaccurately. They often talk about it as if it’s a specific program that you can apply to, rather than a series of updates to the collection process that affect multiple tax relief programs.
Is the Fresh Start Program a limited-time offer?
No, these updates have been in existence for over 10 years, and they have been improved since that time. If someone claims that Fresh Start is a limited-time offer, they may be using misleading sales tactics to get you to sign up with their company. Reputable tax pros don’t need to resort to these types of tactics.
Do I need to apply for the Fresh Start program as quickly as possible?
Tax relief firms often use tight deadlines to get people to sign up for their services quickly, but there are no deadlines for the Fresh Start program. Instead, you need to pay attention to collection deadlines set by the IRS. For example, if you receive a Final Notice of Intent to Levy with your rights to a hearing, you usually only have 30 days to take action before the IRS starts levying your assets or garnishing your wages.
Why do tax relief companies talk about the Fresh Start program?
Essentially, these companies talk about Fresh Start so you will search for it online. When you do, the IRS website won’t be at the top of the results because this program is old news for the IRS. Instead, all of the tax relief companies will be at the top of the search results.
In contrast, if you search for the IRS programs mentioned above, the IRS will dominate the search results. In other words, these companies use this phrase because it’s an effective way for them to get internet traffic.
Get Help With Your Tax Debt Today
The Fresh Start program may be old news, but it is still helping taxpayers in 2024. To get help with your tax debt today, contact us at Damien’s Law. We won’t use harsh sales techniques or lies about limited-time offers. Instead, we’ll stick to the real facts that can help you.
When you contact us, we’ll get to know as much as possible about your tax situation, your finances, and your personal goals. Then, we’ll craft a relief option that works for your unique situation. We are a boutique tax firm that cares about our clients and strives to get them the best results possible. Get in touch so we can help you today.
