“Fresh Start” is the name the IRS gave to a set of collection changes it announced in 2011 to help individuals and small businesses pay back taxes and avoid tax liens. It is not a separate program with its own application. The relief comes through the IRS’s regular collection tools, which have continued to change since then. This article explains what Fresh Start changed and what is available today.
What Fresh Start Changed
In a February 2011 announcement (IR-2011-20), the IRS described changes to its lien and collection practices, including:
Raising the dollar threshold at which liens are generally filed, so that fewer liens would be filed.
Withdrawing a lien, on request, once the tax is paid in full.
Allowing lien withdrawals for taxpayers with unpaid assessments of $25,000 or less who enter into a Direct Debit Installment Agreement, after a probationary period showing that the payments will be honored.
Expanding streamlined installment agreements to small businesses with $25,000 or less in unpaid tax, with 24 months to pay.
Expanding the streamlined offer in compromise program to more taxpayers.
Many of the specific terms have since been revised, so current IRS rules, not the 2011 announcement, determine what is available today.
Payment Plans Today
Short-term plans. Individuals who owe less than $100,000 in combined tax, penalties, and interest can apply online for a short-term plan to pay within 180 days. The IRS states that a taxpayer who qualifies for a short-term plan is not charged a user fee.
Long-term plans. Individuals who owe $50,000 or less in combined tax, penalties, and interest, and who have filed all required returns, can apply online for a long-term payment plan. The IRS’s Simple Payment Plans, available to individuals with $50,000 or less in assessed tax, penalties, and interest who are current with filing and payment requirements, do not require a collection information statement or a lien determination. Most taxpayers have up to 10 years to pay, although a longer term means more interest and penalties. Businesses may qualify at different thresholds.
Larger balances may still be paid in installments, but the IRS may require financial information, such as Form 433-F, Collection Information Statement.
Costs and protections. Setup fees apply to long-term plans, with a reduced fee for automatic bank withdrawals, and the fee is waived or reimbursed for qualifying low-income taxpayers. Interest continues until the balance is paid. For individuals who filed on time, the failure-to-pay penalty drops from 0.5% to 0.25% per month while an approved plan is in effect. The IRS generally does not take enforced collection action while a plan request is pending, while a plan is in effect, for 30 days after a request is rejected or a plan is terminated, or during an appeal of a rejection or termination.
Offers in Compromise
An offer in compromise settles a tax debt for less than the full amount. The IRS generally approves an offer when the amount offered represents the most it can expect to collect within a reasonable period, based on the taxpayer’s income, expenses, and asset equity. To apply, a taxpayer must have filed all required returns and made required estimated payments and must not be in an open bankruptcy proceeding. The application requires a $205 fee and an initial payment, such as 20% of the offer amount for a lump-sum offer, unless the taxpayer meets the low-income certification guidelines. The IRS suspends other collection activities while it evaluates an offer.
Penalty Relief
The IRS’s First Time Abate relief removes failure-to-file, failure-to-pay, and failure-to-deposit penalties for taxpayers with a history of timely compliance, but it must be requested. Beginning in summer 2026, the IRS is transitioning to Automatic Exemption from Penalty, which applies automatically to 2025 and later tax year returns when the taxpayer timely filed and paid for the prior three years. Taxpayers who do not qualify may request relief based on reasonable cause, which the IRS decides case by case.
Hardship
If a taxpayer cannot pay because of financial hardship, the IRS may place the account in Currently Not Collectible status, which suspends most collection activity. The debt is not forgiven, penalties and interest continue to accrue, and the IRS may file a Notice of Federal Tax Lien, apply refunds to the debt, and review the taxpayer’s finances later.
Fresh Start is a label for collection changes, not an application. The practical steps are to file all required returns, determine the balance, and then choose among a payment plan, an offer in compromise, hardship status, and penalty relief.
The Bottom Line
The options associated with Fresh Start remain available in updated form. Which one fits depends on the size of the balance, the taxpayer’s income and assets, and whether all returns have been filed.
Behind on Your Taxes?
Tax attorney Cassra Minai, Esq. can review your balance and collection options in a confidential consultation.