Is the IRS Fresh Start Program Legitimate? What to Look Out For

If you’ve struggled with past due taxes, an ever-growing tax bill, and more interest and penalties than seem fair, you’ve likely come across information on the IRS Fresh Start program. Depending on your sources, you may have heard that it’s a way to pay less than what you owe on your taxes, a way to spread payments out over time, or a way to delay payments until you are able to catch up. In some ways that’s true, but the IRS Fresh Start program isn’t a special IRS-approved program that you need to apply for. Rather, it’s a set of laws that alleviated penalties for certain taxpayers and expanded payment options for those who need more time to pay their taxes. Unfortunately, some big tax relief firms have seized upon this opportunity and used the term “Fresh Start program” to hawk their services, acting as if you have a limited amount of time to take advantage of IRS payment options. No matter what your tax situation is, you deserve accurate and clear information about what your options are, how long you have to pursue them, and how they may affect your finances. To help you out, we’ve put together this guide to the Fresh Start Program. To get help now, contact us today.

Understanding the IRS Fresh Start Program

First and foremost, it’s important to understand that the Fresh Start program is not a new set of tax payment options created by the IRS. It’s simply a memorable name used to encapsulate the various changes made to tax debt payment laws in 2011. Realizing that millions of taxpayers were struggling with their taxes and falling further behind, the IRS developed these changes to provide support to a larger number of taxpayers. There are several components of the Fresh Start Initiative that help taxpayers in different ways.

Key Components

The key components of the Fresh Start Initiative include:

• Tax lien thresholds: As part of the Fresh Start Initiative, the IRS increased the dollar threshold for issuing liens. This results in fewer tax liens. Additionally, they made changes to allow taxpayers to secure lien withdrawals more easily after paying off their tax bills. Taxpayers can also have their liens withdrawn after setting up a Direct Debit Installment Agreement.
• Installment agreements: Through this initiative, the IRS decided to request less financial information from taxpayers who want payment plans, making the application easier. This is also when the IRS increased the maximum payment term from five years to six years.
• Offer in Compromise: In the first round of Fresh Start changes, the IRS changed the OIC program to help more taxpayers. Their changes aimed to make the program accessible to more people by taking into consideration monthly expenses and other real-life circumstances.
• Penalty abatement: Penalty relief was a key part of the early Fresh Start Initiative. Taxpayers who were unemployed for part of the 2011/2012 tax years, as well as self-employed individuals who saw a 25% decrease in income, could request relief from penalties.

Goals

The primary goal of the Fresh Start Program is to help taxpayers get caught up without having to resort to liens, levies, and other aggressive collection tactics. When taxpayers take advantage of the options offered by the IRS, the IRS hopes that they will stay compliant with IRS filing requirements, get some breathing room in their budget, and get to a place of better financial stability. This also benefits the IRS. Filing liens and levies against taxpayers is time-consuming and expensive, and if a taxpayer genuinely does not have the money to pay those taxes, all of those efforts generally result in no additional income for the IRS. By easing up on the requirements for Offer in Compromise payments, installment agreements, and tax liens, the IRS makes it more likely that families can actually make payments towards their taxes. Ultimately, they will likely collect more, and taxpayers will get some extra room in their budget.

Evaluating the Legitimacy of the Fresh Start Program

While the IRS coined the terms “Fresh Start Program” and “Fresh Start Initiative,” tax relief firms quickly picked up these phrases for marketing purposes. As a result, when you search for this term online, the results will typically be to big tax relief firms, not to the IRS website. When terms get muddied like this, it’s harder for taxpayers who genuinely need assistance to find payment plans and options that fit their needs.

How Companies Misuse the Term “Fresh Start Program”

If you’ve spent any time looking into the Fresh Start Initiative, you’ve likely seen no shortage of companies offering to help you apply for the Fresh Start Program, find out if you qualify for the Fresh Start Program, or get you enrolled in the Fresh Start Program. This is a misrepresentation of what the Fresh Start Initiative actually is. The Fresh Start Initiative is simply a series of changes made to existing IRS programs and laws. Unfortunately, a number of companies have targeted this term and made it look like an IRS program that you need to apply for. They also make it look like you need their help to explore IRS payment plans and relief options. In particular, companies use the term “Fresh Start” to create a false sense of urgency. They may indicate that time is running out and that if you don’t apply now, you lose your opportunity to get any sort of relief from the IRS. They may also make outlandish claims that you can settle your tax debt for pennies on the dollar or get your tax debt forgiven by making a few small payments. Now, to be clear, there are situations where you can settle your tax debt for far less than you owe or after a few payments. However, the majority of taxpayers do not fit into this category. Those who do are those with extremely limited income and assets. In these cases, the IRS is happy to collect whatever it can, even if it’s much less than what is owed. For most taxpayers, the IRS expects taxpayers to pay what their budget realistically allows them to pay. By pushing people to apply immediately and pay an “application fee” before even speaking to a qualified representative, these companies take advantage of those who need actual assistance dealing with the IRS. When you talk to these companies, it’s fairly easy to tell that you’ve been pulled into their marketing funnel. First, the person you’ll speak with is not an Enrolled Agent, CPA, or tax attorney—it’s a sales representative whose training is in using high-pressure sales tactics to force you to make a decision on the spot. They don’t have the knowledge needed to figure out what programs you do or do not qualify for, much less to help you through the application process. While your file will still end up with a qualified representative at some point, those representatives are generally so overworked that your case gets the minimum amount of attention needed to push it through to the IRS. If the Fresh Start Initiative changes could benefit you and help you get back on track financially, it’s important to talk to an Enrolled Agent, CPA, or tax attorney. These professionals are bound by the standards found in Circular 230, the Regulations Governing Practice Before the Internal Revenue Service. They are obligated to act in your best interests and uphold strict standards of professionalism.

Fresh Start Application

One service that many of these companies seem to offer is quick access to an “IRS Fresh Start Program application.” The problem is that there is no IRS Fresh Start application. Each of the relief and payment options offered by the IRS is separate from the others, and each has its own application requirements. When you fill out a company’s application, they essentially use that information to market to you more effectively. Ultimately, the rep assigned to your case will use your “application” to figure out if you qualify for any relief options, but you can generally save time and skip the high-pressure sales tactics by working directly with a tax firm that solely utilizes qualified tax professionals.

Overview of Real-Resolution Options

So, if the IRS Fresh Start Program isn’t technically a program, what payment relief options are available? There are numerous ways to tackle your tax debt and avoid further collection efforts by the IRS including the following.

Installment Agreements

This is generally the preferred way to handle your tax debt, as the IRS would obviously rather collect everything it’s owed than accept a smaller settlement. Although interest does accrue on your balance, you do not have to worry about collection actions once you set up a payment plan. The IRS offers both short-term payment plans, which last up to 180 days, and long-term payment plans, which last up to six years or even longer in select cases.

Offer in Compromise

An Offer in Compromise allows you to settle your tax debt for less than the amount due. The IRS may consider an Offer in Compromise if you cannot be approved for a payment plan due to the amount you owe or your current income. The IRS does require a substantial amount of financial information to ensure that the offer you’ve submitted is a true reflection of what you are able to pay. An Offer in Compromise may be paid in one lump sum or spread out over several monthly payments.

Penalty Abatement

The IRS does provide penalty relief for some taxpayers, particularly those who have ended up behind on their taxes through a misunderstanding of their obligations or a simple mistake. Those who have not had issues with their taxes before are more likely to be approved for penalty abatement than those who have frequently filed late or missed payments.

Partial Payment Installment Agreement

A Partial Payment Installment Agreement—or PPIA for short—allows taxpayers to make monthly payments. The final amount paid is less than what they owe, as the final balance cannot be paid before the Collection Statute Expiration Date.

Currently Not Collectible

If your income is low enough and your expenses high enough that you cannot afford to pay anything toward your tax debt, the IRS may temporarily place you in CNC status. Currently Not Collectible status means that the IRS temporarily stops attempting to collect payments from you. It does not stop interest from accruing, nor does it absolve you of your tax debt. The IRS does check in regularly to see if you are able to resume payments, and once you are, they will expect you to either pay in full, make an Offer in Compromise, or apply for an installment agreement.

Common Misconceptions Debunked

There are a number of myths and misconceptions floating around about the IRS Fresh Start Program. They include:

• Myth: The Fresh Start Program is ending soon, and I have to act now. Truth: The Fresh Start Program changes were introduced over 10 years ago, and the IRS has not given any indication that they plan on tightening up these restrictions any time soon. The choices you make when handling your tax debt will affect your finances for years or decades to come, and it’s important to take your time assessing your options.
• Myth: The IRS is willing to accept pennies on the dollar, and working with a certain company gives me that opportunity. Truth: There is no secret “back door” to settling your tax debt for a tiny fraction of what is owed. The IRS will only accept this type of payment offer if it’s genuinely what you are able to pay. A skilled tax attorney will almost always get you a better outcome than a big tax relief firm driven by salespeople.
• Myth: If I don’t start working with a company immediately, I could lose my home, vehicles, and income. Truth: It is true that you risk losing your assets and income to levies if you continuously ignore IRS communications and refuse to take steps to tackle your tax debt. However, don’t fall for underhanded marketing tactics that try to make you act now—discuss your options with a qualified tax professional first.

Fears and Doubts About the Fresh Start Program

People worry about ending up “on the IRS’s radar” when they apply for installment agreements, an Offer in Compromise, or other payment options. The fact is that the IRS doesn’t want to seize people’s assets or income. They would much rather handle a taxpayer’s debt in a reasonable manner, and the sooner you request help, the easier it is to do that. Taxpayers also worry that utilizing one of these payment options now will bar them from exploring those options in the future. Remember, the IRS wants to collect what it’s owed—even if that means receiving it over a period of six years or possibly accepting a lower settlement amount. Should you end up in tax trouble in the future, your use of payment options now won’t bar you from seeking assistance in the future.

Misinformation Spreads Quickly—Verify Facts Before You Make Any Decisions

The IRS Fresh Start Program has been around for over a decade at this point, and yet it has been so thoroughly misrepresented and twisted by companies seeking to make a quick buck that it’s difficult to find accurate information on it. When you’re struggling with your tax debt, you deserve guidance from a licensed tax professional—not a high-pressure salesperson who cares more about making a commission off of you than helping you. If you’re being pushed to make an immediate decision or you’re told that the offer on the table won’t be available if you take some time to think, listen to your gut, and look elsewhere for the help you need.

Frequently Asked Questions

What is the IRS Fresh Start Program and who is it for?

This term refers to a set of legislation changes made by the IRS in 2011. It aims to serve taxpayers who are struggling to make ends meet while also getting caught up on their taxes. The IRS recognizes the tough economic climate we’re in and hopes to reach more families with these changes.

How do I know if I’m eligible for the Fresh Start Program?

There are several program changes that fall under the umbrella of the Fresh Start Program. You can apply for each of these payment plans or relief options individually or discuss your options with a tax attorney who can take an overall look at your tax situation and provide more targeted guidance.

Can the IRS Fresh Start Program really help reduce my tax debt?

In some cases, the IRS Fresh Start Program can reduce how much you owe. If you qualify for penalty abatement, that could considerably decrease your tax bill. If you qualify for an Offer in Compromise, your overall tax bill could be settled with one or multiple payments equaling less than you owe.

What are the steps to apply for an Offer in Compromise through the Fresh Start Program?

You can try the IRS Pre-Qualifier Tool to get a basic overview of the numbers and whether or not you’re likely to be approved for an Offer in Compromise. When you apply, you have to submit Form 656, Form 433-A, your application fee, and your initial offer payment. The IRS will either accept or not accept your payment arrangement.

Are there any downsides to using the IRS Fresh Start Program?

Since each aspect of the Fresh Start Initiative is its own separate program, there are risks and benefits to each program. If you come to an agreement with the IRS via one of these programs, you must stay current on your payments and all necessary tax filings to remain in good standing with them. For example, if you qualify for an installment agreement and then start skipping payments, the IRS can and will terminate your payment plan. At that point, the entire balance is due. When you make an arrangement via one of these programs, make sure you are capable of fulfilling its terms.

Get Help Today

At Timothy S. Hart Law Group, we pride ourselves on offering taxpayers real, legitimate assistance with their tax debt. Our goal isn’t to force you into an agreement that you can’t afford or rush you into a decision. We’re here to look at your financial situation, provide different options available to you, and help you choose the best path forward. Call our Albany office at 518-213-3445, call our New York City office at 917-382-5142, or reach out online to set up a consultation with one of our tax professionals.