What the IRS Fresh Start Program Is

The IRS Fresh Start Program is a set of options the IRS offers to people and businesses who owe back taxes and cannot pay in full right away. It is not a forgiveness program — you still owe the money — but it gives you ways to settle the debt without losing your home, bank account, or business. The program includes payment plans, offers to settle for less than you owe, and temporary delays in collection action.

The Fresh Start Program has been in place since 2011 and is available to anyone with unpaid federal income tax. The IRS does not decide whether to let you use it; instead, you choose which option fits your situation, then the IRS either accepts or denies your request based on your income, assets, and what you owe.

Key Takeaways

  • The Fresh Start Program offers three main paths: a payment plan, an offer in compromise (settling for less), or a temporary hold on collection while you get your finances in order.
  • You must file all required tax returns before you can use any Fresh Start option, even if you cannot pay what you owe.
  • Payment plans are the easiest to set up and require no special paperwork if you owe less than $50,000 in combined taxes, penalties, and interest.
  • An offer in compromise lets you propose paying a fraction of what you owe, but the IRS accepts only if your proposal is realistic based on your income and assets.
  • You can request a temporary pause in collection (called currently not collectible status) if you have no income or assets to pay with right now.

The Three Main Options Under Fresh Start

A payment plan is the most common Fresh Start choice. You agree to pay your tax debt over time — usually three to six years — in monthly installments. If you owe $50,000 or less, you can set up a plan online or by phone without submitting financial paperwork. If you owe more, you must provide income and expense details so the IRS can calculate how much you can afford each month.

An offer in compromise lets you propose paying the IRS a smaller amount than you actually owe, and they can accept it. This is harder to get approved for. The IRS will only accept your offer if the amount you propose is close to what they believe they could collect from you over time, based on your income, assets, and age. Most people do not may have access to because the IRS calculates that they can afford to pay more.

Currently not collectible status is a temporary pause. If you have no income and no assets the IRS can take, you can ask them to stop collection efforts for now. Interest and penalties keep adding up, but the IRS will not garnish your wages, seize your bank account, or place a lien on your home while you are in this status. You must reapply every two years to stay in the program.

What You Need Before You Request Fresh Start

You must have filed all required tax returns for the past six years, even if you did not pay what you owed. If you have not filed, you cannot use Fresh Start until you do. The IRS will not accept a payment plan, offer in compromise, or currently not collectible request from someone with unfiled returns.

You will also need to know your total tax debt — the amount of tax you owe plus penalties and interest. You can find this on an IRS notice (usually a bill or a letter about collection), or you can call the IRS at 1-800-829-1040 and ask for your account balance. Have your Social Security number and the tax year in question ready when you call.

If you are requesting an offer in compromise or currently not collectible status, you will need to provide recent pay stubs, bank statements, and a list of your assets (home, car, savings). For a payment plan under $50,000, you do not need to submit these documents upfront.

How to Request a Payment Plan

If you owe $50,000 or less in combined taxes, penalties, and interest, you can set up a payment plan online through the IRS website or by calling 1-800-829-1040. You will need your Social Security number, the tax year you owe for, and your total debt amount. The process takes about 15 minutes.

The IRS will offer you a choice of payment dates each month — usually the 15th or the 28th. You can pay by direct debit from your bank account, by credit or debit card (with a processing fee), or by mail. Once your plan is approved, you will receive a letter confirming the monthly amount and the due date.

If you owe more than $50,000, you must submit Form 433-F (Collection Information Statement for Wage Earners and Self-Employed Individuals) along with recent pay stubs and bank statements. This tells the IRS how much you can afford to pay each month. The IRS will review your paperwork and either approve a plan, offer you a different amount, or deny the request.

How to Request an Offer in Compromise

To propose paying less than you owe, you submit Form 656 (Offer in Compromise) to the IRS along with Form 433-A or 433-B (depending on whether you are self-employed), recent pay stubs, bank statements, and a list of your assets. The IRS uses a formula to calculate the minimum they will accept: roughly, your monthly disposable income multiplied by 24 months, plus the value of your assets they could seize.

For example, if the formula says you could pay $8,000 over two years and you owe $20,000, the IRS will not accept an offer of $3,000. But if you propose $7,500, they might accept it. The IRS reviews offers in the order they arrive, and the process usually takes four to six months.

You can submit an offer online through the IRS Online Payment Agreement tool, or by mail to the IRS address listed on Form 656. While your offer is under review, the IRS typically pauses collection action, though they can still file a lien on your property.

How to Request Currently Not Collectible Status

If you have no income and no assets, you can ask the IRS to put your account in currently not collectible status. Submit Form 433-F along with proof of your situation — recent pay stubs showing zero income, bank statements showing minimal funds, and a letter explaining your hardship. Mail these to the IRS address on the form or submit them through the IRS website.

The IRS will review your request and either approve it or ask for more information. If approved, collection efforts stop for two years. After two years, you must reapply. If your situation improves — you get a job or inherit money — you should notify the IRS, because they will eventually resume collection once you have income again.

Interest and penalties continue to accrue while you are in currently not collectible status, so your total debt grows. But the IRS cannot garnish wages you do not have or seize assets you do not own, so this option protects you from collection action during a temporary hardship.

Frequently Asked Questions

Can I use Fresh Start if I owe state taxes too?

No. The Fresh Start Program covers only federal income tax owed to the IRS. If you owe state taxes, you must contact your state tax agency separately. Some states have their own payment plan or settlement programs, but they are not part of Fresh Start.

What happens to my tax refund while I am on a payment plan?

The IRS will intercept any refund you receive and apply it to your tax debt. This continues until your debt is paid off. If you are on a payment plan and expect a refund, the IRS will use it to reduce what you owe rather than sending it to you.

Does Fresh Start remove the tax lien from my property?

No. A tax lien stays on your property record until you pay off the debt or the lien expires (usually after ten years). However, if you set up a payment plan and make payments on time, the IRS may agree to withdraw the lien early. You must request this in writing once you have made several months of payments.

Can I change my payment plan if my income changes?

Yes. If your income drops and you cannot afford your monthly payment, you can request a modification. Call the IRS at 1-800-829-1040 or submit a new Form 433-F showing your updated financial situation. The IRS will recalculate your payment based on your current income.

What if the IRS rejects my offer in compromise?

If your offer is rejected, the IRS will explain why in a letter. You can appeal the decision within 30 days, or you can submit a new offer with a higher amount. If you do neither, your original tax debt remains due, and the IRS may resume collection action.