The IRS Fresh Start Program provides relief for taxpayers who are struggling to pay their tax debts. The program offers several options to help taxpayers get a “fresh start” on their tax obligations. Here are the main eligibility requirements to qualify for the different parts of the Fresh Start Program:
Currently Not Collectible Status
Currently Not Collectible (CNC) status provides temporary relief from IRS collection efforts. To qualify for CNC status:
- You must be facing financial hardship and unable to fully pay your tax debt
- Your income must be less than your reasonable basic living expenses
The IRS will review your financial information, including Form 433-F (Collection Information Statement), to determine eligibility. CNC status pauses IRS collection action, but penalties and interest will continue to accrue. The IRS will review your case periodically to determine if your financial situation has improved. CNC status usually lasts for 1 year, but can be renewed.
Offer in Compromise
An Offer in Compromise allows you to settle your tax debt for less than the full amount owed. To qualify for an offer in compromise:
- You must not be in an open bankruptcy proceeding
- You must have filed all required tax returns
- You must make all required estimated tax payments for the current year
- You must not have sufficient assets or income to fully pay the amount due
The IRS considers special circumstances that affect your ability to fully pay, such as:
- Medical expenses
- Unemployment
- Divorce
- Disaster losses
You must submit Form 656 (Offer in Compromise) with supporting documentation to apply. The IRS will determine an appropriate offer amount after reviewing your financial information.
Non-Streamlined Installment Agreements
Non-streamlined installment agreements allow you to pay your balance due over time in monthly payments. To qualify:
- You must owe $25,000 or less in aggregate unpaid balances of assessments
- You must be in compliance with all tax filing and payment requirements for the previous 5 tax years
- You cannot be in an open bankruptcy proceeding
You can apply online or submit Form 9465 (Installment Agreement Request). The IRS will inform you of the minimum monthly payment amount based on your income and expenses. The agreement term cannot exceed 72 months.
Partial Payment Installment Agreements
If you cannot afford a regular installment agreement, a Partial Payment Installment Agreement allows you to pay what you can afford. To qualify:
- You must be unable to meet the minimum monthly payment for a regular installment agreement
- The IRS will review your income, assets, and expenses to determine your affordable payment amount
A Partial Payment Installment Agreement is short-term, usually lasting only 1 to 2 years before reevaluation. You must be in compliance with filing and payment requirements.
Penalty Abatement
Penalty Abatement removes certain penalties for tax periods prior to the previous 3 tax years. The IRS may abate penalties for reasonable cause, including:
- Death, serious illness, or unavoidable absence
- Disaster or casualty loss
- Reliance on incorrect tax advisor advice
- Unavoidable delays in responding to IRS notices
You must submit Form 843 (Request for Abatement) with documentation supporting your reasonable cause. Interest cannot be abated under the First Time Penalty Abatement.
Who is Not Eligible for the Fresh Start Program?
You generally cannot qualify for the Fresh Start Program if:
- You are in an open bankruptcy proceeding
- You have not filed all required tax returns
- You have not made required estimated tax payments
- You do not provide complete and timely requested information
- You do not meet the specific eligibility criteria described above
The IRS also cannot provide penalty relief under the First Time Penalty Abatement more than once in a 3 year period.
How to Apply for the Fresh Start Program
Here are the steps to apply for each Fresh Start program option:
Currently Not Collectible Status
- Complete Form 433-F (Collection Information Statement) providing details on your monthly income and expenses
- Submit Form 433-F and supporting documentation to the IRS
- The IRS will review and determine if you qualify for CNC status
- If approved, the IRS will suspend collection activity temporarily
Offer in Compromise
- Complete Form 656 (Offer in Compromise) indicating your proposed settlement amount
- Complete Form 433-A (Collection Information Statement for Wage Earners) or 433-B (Collection Information Statement for Businesses) detailing your assets, income, expenses, and ability to pay
- Submit your offer forms and $205 application fee to the IRS (fee can be waived for low-income taxpayers)
- The IRS will review your information, verify ability to pay, and determine whether to accept or reject your offer
Installment Agreements
- You can request an installment agreement online through the Online Payment Agreement tool at IRS.gov or by submitting Form 9465
- Provide details on your income, expenses, and proposed monthly payment amount
- The IRS will review and inform you if your request is approved
- If approved, you must make timely monthly payments
Penalty Abatement
- Complete Form 843 (Request for Abatement) indicating the tax periods and penalties you want abated
- Submit documentation supporting your claim of reasonable cause
- The IRS will review your request and make a determination
- If approved, you will receive notice that the penalties were abated
You should respond promptly to all IRS notices and requests for information to avoid delays or denial of your Fresh Start application. Contact the IRS immediately if your financial situation changes.
The Benefits of the Fresh Start Program
The benefits of the IRS Fresh Start Program include:
- Avoid aggressive collections – Getting placed into Currently Not Collectible status stops levies, wage garnishment, bank account seizures, and other collection actions.
- Lower your tax debt – An offer in compromise allows you to settle for less than you owe based on your finances.
- Affordable payments – Installment agreements tailor payment plans you can afford with your income.
- Penalty relief – Abating penalties reduces the amount you owe the IRS.
- Peace of mind – Resolving tax debts through Fresh Start can relieve stress and uncertainty.
- Avoid bankruptcy – Settling tax obligations may make personal bankruptcy unnecessary.
- Become compliant – The program helps you resolve past issues and meet current obligations.
The Fresh Start Program gives taxpayers who cannot fully pay their tax debts options to resolve the obligations in a manageable way.
Common Questions about the IRS Fresh Start Program
Here are answers to some frequently asked questions about the IRS Fresh Start Program:
Can I qualify for the Fresh Start Program if I owe both individual and business taxes?
Yes, eligibility is based your overall tax debt situation. The IRS will review your total unpaid balances, income, expenses and assets from all sources when considering Fresh Start options.
Does the Fresh Start Program apply for state/local tax debts too?
No, the IRS Fresh Start Program only applies to federal tax debts that you owe to the IRS. It does not apply to state or local tax obligations.
How long will it take for my Fresh Start application to be processed?
Processing times vary depending on your specific situation and application volumes, but expect it to take at least 4-6 weeks or longer to get a response on your Fresh Start request.
If I owe taxes again in the future, can I use Fresh Start again?
Generally, you can qualify again for most Fresh Start programs if you have future inability to fully pay tax debts. Exceptions are the one-time First Time Penalty Abatement and limits on how often you can receive Currently Not Collectible status.
Will being in the Fresh Start Program impact my credit score?
The IRS is not a credit reporting agency, so Fresh Start options will not directly affect your credit score or appear on your credit report. However, resolving tax debts through the program can allow you to pay other obligations and improve your credit over time.
Can the IRS revoke my Fresh Start status later on?
Yes, the IRS will continue to monitor and review your case periodically. If your financial situation improves significantly or the IRS finds you are no longer eligible, they may terminate certain Fresh Start provisions like Currently Not Collectible status or Installment Agreements.
Conclusion
The IRS Fresh Start Program offers solutions to taxpayers struggling with tax debts they cannot fully pay at once. The main options include Currently Not Collectible status, Offer in Compromise, Installment Agreements, and Penalty Abatement. Each program component has certain eligibility criteria that the IRS will review when considering your request for relief. The overall benefits include reduced collection enforcement, lower balances owed, and affordable payment plans. With some specific exceptions, taxpayers can generally qualify and benefit from Fresh Start multiple times if they incur new tax debts in the future. Contacting the IRS as soon as you experience inability to pay your taxes gives you the best chance to resolve your obligations on favorable terms through the Fresh Start Program.
| Fresh Start Program | Main Eligibility Requirements | How to Apply |
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| Currently Not Collectible Status |
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| Offer in Compromise |
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| Installment Agreements |
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| Penalty Abatement |
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