The IRS Fresh Start program offers taxpayers a way to address their tax debt, pay it back for less than they owe, and get back in good standing with the Internal Revenue Service (IRS). When you owe the IRS, tax debt can be incredibly overwhelming and financially destabilizing. The Fresh Start program can help prevent collection actions, help you become tax-compliant, and give you more control over your future.
The Basics of the IRS Fresh Start Program
Taxpayers may owe taxes on a yearly, quarterly, or other periodic basis. Late payments, information errors, or other process errors can lead to civil penalties. In 2024, the IRS collected $120 trillion in gross collections in the U.S. In the same year, the agency assessed $84 billion in civil penalties.
If a taxpayer doesn’t address the penalties or unpaid taxes, the amounts grow with interest and can become a much larger liability. For many taxpayers, it can quickly become an unmanageable debt that they cannot repay.
The Fresh Start program began in 2011, which expanded the program for securing an offer in compromise (OIC). Now, the Fresh Start program involves applying for an OIC through their current requirements. If you qualify and are approved for an OIC, you pay the IRS a set amount, which is less than your full liability, and once the amount is paid, the rest of your liability is forgiven.
How Does the IRS Assess an Offer in Compromise Through the Fresh Start Program?
It’s very hard to get an OIC. The IRS received nearly 33,600 OICs in 2024 and accepted only just under 7,200. If you make an offer in compromise, the IRS will consider facts like:
- Your ability to pay
- Your income
- Any expenses
- Asset equity
Based on this information and other qualifications, the IRS will determine if it thinks you cannot pay your full tax debt or if it would cause you financial hardship. The IRS is more likely to accept an OIC in these situations, and if the agency thinks the amount you offered is the amount it can reasonably collect.
Settling Your Debt Before the Fresh Start Program
Addressing your tax debt through the Fresh Start program and an OIC is useful, but it cannot be your first step when you have tax debt. First, the IRS expects you to pay back any debt you owe in full. Most debt relief options are only available if paying your debt fully would cause financial hardship or isn’t financially possible.
If you can’t pay your debt because of these circumstances, then you must consider other debt settlement methods before an OIC. This includes:
- Installment agreements, or a payment plan that gives you more time to pay the IRS in full
- Currently Not Collectible status, which temporarily pauses the collection of your debt if your financial hardship is not permanent
- Penalty abatement, which can remove specific penalties for reasonable cause or for first-time abatement
- Innocent spouse relief, if your spouse created the debt on a joint tax return and you weren’t aware of it
Only after trying these debt settlement options could you potentially apply for an OIC through the Fresh Start program.
Requirements to Qualify for the Fresh Start Program
There are several qualifications you must meet in the Fresh Start program. To even qualify to file an offer in compromise, you must meet the following requirements:
- All your tax returns and/or estimated payments that are required have been filed
- You have received a bill for at least one of the debts that is a part of the OIC
- If the OIC is for the current tax return year, then you have a valid extension
- You are not currently in an open bankruptcy proceeding
- You paid the application fee, if required, and provided the first required portion of the OIC offer
- If you are an employer, then you paid your tax deposits for the current quarter and the two previous quarters
Additionally, the IRS must find one of the following true to potentially accept an OIC made:
- Doubt as to liability: The IRS must see a genuine doubt or disagreement about the amount of the tax liability you owe, or doubt that you owe the tax liability at all.
- Doubt as to collectibility: The IRS sees proof that it is genuinely unlikely the agency can recover the full debt amount. This is usually the case when your tax debt is greater than the combined value of your income and assets.
- Efficient tax administration: The IRS can also accept your OIC if it decides it would be effective tax administration to do so. There is no doubt of liability or collectibility, but the agency has determined that requiring full payment would be unfair, inequitable, or cause a financial hardship.
If you meet these qualifications, you may be able to secure an OIC to address your tax liability.
Collection actions are paused while the agency assesses your OIC. Even if the OIC is rejected, there is still a pause during the time you can appeal. You can pause actions such as levies or garnishments while the IRS considers your offer, and these actions may be ended entirely if the OIC is approved.
How Do You Pay for an Offer in Compromise?
There are two payment options the IRS offers for an OIC. These are:
- A lump sum OIC: If you choose this option, an application for an OIC must include the first 20% of the proposed payment. If accepted, you must pay the remaining lump sum in 5 or fewer payments. These payments must be made within 5 months.
- A periodic payment OIC: In a periodic payment, the first monthly installment needs to be included in your application. While the IRS considers your OIC application, you must continue to pay the stated amount each month. If accepted, pay this amount each month until you pay the entire OIC amount. A periodic payment OIC is paid in 6 or more monthly payments and cannot exceed 24 months from the date the IRS accepts the offer.
It’s important to be careful when offering an amount for your OIC. Once you make the offer and it is accepted, you need to be able to pay the amount. If you don’t, the IRS can decide the OIC is in default and take other actions to recover your debt. You want to find the right balance in your OIC application, as the amount needs to be acceptable to the IRS without causing your financial hardship.
FAQs About the IRS Fresh Start Program
Who Qualifies for the IRS Fresh Start Program?
Very few taxpayers qualify for the IRS Fresh Start program, also called an offer in compromise. Taxpayers must meet minimum qualifications, such as being up to date on current tax returns, paying the application fee, and not being involved in an active bankruptcy proceeding. The IRS must also see proof that there is doubt you are liable for the debt, doubt you can pay the debt, or that an OIC would be effective tax administration.
How Much Does an IRS Fresh Start Cost?
The cost of the IRS Fresh Start program includes an application fee, the first portion of your offer in compromise payment, and your attorney’s fees. The application fee is $205, although this fee may not be required if you are filing because there is doubt you are liable for the tax, or if you have a low income. The first portion of your OIC may be your first monthly payment or 20% of the lump sum.
What is the Tax Relief Program for this year?
In 2026, the tax relief program through the IRS largely remains the same. You can reduce or eliminate tax debts you owe through relief options such as penalty abatement or innocent spouse relief. If you owe tax debt and cannot pay it, you could qualify for other forms of relief, like Currently Not Collectible status or an installment agreement. In rare cases, you may apply for an offer in compromise. An attorney can help you review these options.
Why Should You Hire a Tax Relief Lawyer?
You should hire a tax relief lawyer to find the ideal method to reduce or eliminate your tax debt, saving you money and stress over time. A lawyer can review all the possible options for negotiating your tax debt and determine what is right for your unique situation. A tax relief lawyer helps you stop collection actions and negotiate with the IRS or a state tax agency on your behalf, protecting your rights.
Your Tax Relief Attorney at TaxSmith, LLC
It can be incredibly difficult to qualify for and be approved for an OIC, but it is much easier with legal guidance. An attorney can help you determine if you qualify, prepare your application, and determine the right offer that the IRS is likely to approve.
Filing through the Fresh Start program can be an immense benefit in your life, so it’s important that you do it right. Part of that is choosing the right attorney. At TaxSmith, LLC, we have over a decade of experience in tax law.
We know how to deal with the IRS and many state tax agencies. Our team also understands how draining these cases can be for taxpayers. We offer you clear advice and help demystify the tax relief process. Reach out to our firm today and see how we can help you get your fresh start.
