Fact Sheet: IRS Fresh Start

The Fresh Start program is a new IRS program that makes it easier for individuals and businesses to resolve back taxes, avoid IRS tax liens, and take advantage of more favorable and lenient IRS policies regarding back taxes.

IRS Fresh Start Overview

There are three important areas where the Fresh Start program directly can benefit taxpayers – tax liens, installment agreements and offers in compromise (OIC).

Tax Liens and Fresh Start

The Fresh Start Program has increased the IRS Notice of Federal Tax Lien filing threshold from a minimum liability of $5,000 to $10,000. It is important to note that the Fresh Start Tax Lien modification is not retroactive, so the IRS cannot automatically withdraw a lien that was filed prior to Fresh Start, based on the previous rules.

Taxpayers should also be aware that an IRS tax lien may now be "withdrawn" AFTER entering into an installment agreement with a direct debit payment plan. Individuals and businesses have the right to apply for a lien withdrawal if the tax debt is $25,000 or less. The debt must be paid off within 5 years (60 months) or before the CSED (Collection Statute Expiration Date) expires – whichever occurs first.

IRS Installment Agreements and Fresh Start

Thanks to the Fresh Start Program, it is now easier for taxpayers to qualify for a "streamlined" IRS installment agreement. In September of 2016 the IRS began testing expanded criteria for streamlined processing of taxpayer requests. During this test, taxpayers with an assessed balance of tax, penalty and interest between $50,000 and $100,000 may experience accelerated processing of their installment agreement request. Based on test results, the expanded criteria for streamlined processing of installment agreement requests may be made permanent. While these "streamlined" agreements generally will NOT require a full financial statement, the IRS reports they may require "some financial information from the taxpayer." The payoff term maximum has been increased from 5 years to 6 years (72 months). Tax debt must be paid within the 72 month timeframe or prior to the Collection Statute Expiration Date (CSED), whichever comes first. The IRS reports that the 'easiest way to apply for a payment plan is to use the Online Payment Agreement tool at IRS.gov. If you don't have Web access you may file Form 9465, Installment Agreement, to apply."

IRS Offer-In-Compromise and Fresh Start

Fresh Start makes it easier for taxpayers to qualify for Offer-in-Compromise (OIC) and Fresh Start has also brought more leniency and flexibility to the way the IRS calculates a taxpayer's ability to pay as the IRS reviews and evaluates the IRS settlement application.

Here are some keys to understand regarding the Fresh Start Offer-in-Compromise Program:

• To qualify, the IRS will evaluate your income, expenses, assets, and ability to pay
• The taxpayer must be current on tax return filings and payments
• The taxpayer cannot be in an open bankruptcy
• The offer must be paid in one of the following ways:
  1. Lump sum cash payments, with the first payment being 20% of the offer, with the remaining balance, upon acceptance, paid in five payments or less.
  2. Payment over extended period: Your first payment is paid with your application AND the taxpayer must continue paying monthly while the application is being considered, with the remaining, upon acceptance, paid out over a period of 24 months.
• Note: If the Offer-in-Compromise is not accepted, payments made toward the OIC will not be refunded – but applied to the tax debt previously assessed.

The IRS states that "generally, the IRS will accept an offer if it represents the most the agency can expect to collect within a reasonable period of time. The IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer's income and assets, to make a decision regarding the taxpayer's ability to pay. Use the Offer in Compromise Pre-Qualifier tool on IRS.gov to see if you may be eligible for an OIC."

A Closer Look at the Fresh Start Program

The Fresh Start Program is a positive taxpayer-friendly program instituted by the IRS to give struggling taxpayers a "Fresh Start". It was clearly designed to provide some breathing room for those facing tax problems. However, while some rules and thresholds have been relaxed, these stipulations are still challenging and somewhat complex. This means that, for any business or individual owing a serious amount of back taxes ($10,000 or more) – or facing tax liens, tax levies, wage garnishment, it may be wise to consider the services of an enrolled tax agent or tax attorney who can advise on the best course of action.