What Is the IRS Fresh Start Program?
A program that lets you settle tax debt for less than you owe
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A 2024 study by Qualtrics found that 23% of tax filers expected to go into debt to pay their tax bill, and another 23% said they’d need to take on new debt to resolve it. In fact, IRS data shows Americans owed an estimated $668 billion in back taxes, penalties and interest in 2021 alone.
If you’re overwhelmed by tax debt, you might have heard of the IRS Fresh Start Program. It’s not a stand-alone program, despite having program in its name. Instead, it refers to expanded access to existing IRS tax relief options — most notably, the offer in compromise (OIC), which lets some taxpayers settle their tax bill for less than they owe.
An offer in compromise can help those drowning in tax debt, but it comes with strict eligibility rules and not everyone qualifies.
You must meet strict eligibility rules before the IRS will consider your offer in compromise.
Jump to insightLow-income applicants can skip the application fee and initial payment if they meet income limits.
Jump to insightIf your offer is rejected, you can appeal by submitting additional documentation and IRS forms.
Jump to insightThe IRS lets you choose between lump sum or monthly payments if your offer is accepted.
Jump to insightNot everyone qualifies, and the IRS may reject offers from people who appear able to pay.
Jump to insightAbout the IRS Fresh Start Program
The IRS introduced the Fresh Start initiative in 2011 to expand access to existing tax relief options, especially the offer in compromise (OIC). This made it easier for some taxpayers to resolve their balance for less than they owe. The OIC program is still in place today and serves as a formal agreement between the taxpayer and the IRS.
The IRS states that it generally approves an OIC when “the amount you offer represents the most we can expect to collect within a reasonable period of time.”
Before approving an application, the IRS considers the following factors:
- Your ability to pay
- Total income
- Total expenses
- Any assets
If approved, you can generally pay your revised tax bill in one lump sum within five months or in installments lasting 24 months.
Eligibility requirements for the IRS Fresh Start Program
There are some specific requirements you must meet in order to qualify for the IRS offer in compromise program.
- All required tax returns must be filed and all required estimated payments paid in full.
- You must have a valid tax return extension for the current year.
- There can't be an open bankruptcy case.
- If you're an employer, you must have paid your tax deposits for the current and previous two quarters.
Those in a partnership or corporation aren't eligible. Neither are those residing in a U.S. territory or foreign country. Military personnel using an army post office or fleet post office address also can't file.
To find out if you’re eligible, you’ll first need to create an online account with the IRS. You can then use the site to check eligibility and later log in to make OIC payments.
From there, you’ll create a preliminary proposal — or estimated offer to settle your tax debt — using the IRS Offer in Compromise Pre-Qualifier tool. Even if the tool says you can pay in full, you can still apply for an OIC to request a lower payoff amount.
How to apply for the IRS Fresh Start Program
In order to submit an OIC, you'll need to prepare an application package that includes:
- Completed Form 433-A (OIC) for individuals or 433-B (OIC) for businesses
- Completed Form 656(s) containing individual and business tax debt
- A $205 nonrefundable application fee for each Form 656
- Nonrefundable initial payment for each Form 656 based on your chosen payment method, unless you meet the Low-Income Certification guidelines
Your application should include your proposed offer amount and the elected payment option. There are two types of payment options offered by the IRS for the offer in compromise program:
- Lump sum: You can offer to pay 20% of the total balance within five or fewer payments made within a maximum of five months from the date your offer is accepted.
- Periodic payment: If you can't pay a lump sum upfront, you can make the initial payment with your offer and pay the balance in monthly payments lasting six to 24 months.
If you choose this option, you must keep making monthly payments while the IRS reviews your offer. If you stop paying, your offer may be denied, and you could lose your right to appeal.
Where to submit an OIC
The application package must be submitted via mail to either the Memphis IRS Center or the Brookhaven IRS Center, depending on your state.
Memphis IRS Center
If you live in Arizona, California, Colorado, Hawaii, Idaho, Kentucky, Mississippi, New Mexico, Nevada, Oklahoma, Oregon, Tennessee, Texas, Utah or Washington, mail your application to:
Memphis IRS Center COIC Unit
P.O. Box 30803, AMC
Memphis, TN 38130-0803
Phone: 844-398-5025
Brookhaven IRS Center
If you live in Alaska, Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Iowa, Illinois, Indiana, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, North Dakota, Ohio, Pennsylvania, Rhode Island, South Carolina, South Dakota, Vermont, Virginia, Washington, D.C., West Virginia, Wisconsin, or Wyoming, or if you have a foreign address, mail your application to:
Brookhaven IRS Center COIC Unit
P.O. Box 9007
Holtsville, NY 11742-9007
Phone: 844-805-4980
For step-by-step directions and the required OIC forms, review Form 656-B, the Offer in Compromise Booklet.
Any payments submitted with your application form are nonrefundable and will be applied toward your tax bill if your OIC is denied. While your offer is being considered, penalties and interest will still be applied. You’re also required to file and pay all tax returns, estimated tax payments and federal tax payments for both individual and business filings. Otherwise, you risk having your offer denied.
Offer terms are set once accepted and can't be changed or extended.
Low-Income Certification
If your income is low enough, you may qualify for Low-Income Certification. This means you don’t have to pay the $205 application fee or make an initial payment with your OIC. It also pauses monthly payments while your offer is under review.
To qualify, your gross annual income must be below 250% of the federal poverty level, based on your household size. The IRS calculates this using either:
- Your adjusted gross income from your tax return (Form 1040)
- Your monthly income from Form 433-A (OIC) multiplied by 12
2024 Low-Income Certification limits
Here are the 2024 income limits based on 250% of the federal poverty guidelines:
| Family size | Maximum gross income to qualify |
|---|---|
| 1 | $36,450 |
| 2 | $49,300 |
| 3 | $62,150 |
| 4 | $75,000 |
| 5 | $87,850 |
| 6 | $100,700 |
| 7 | $113,550 |
| 8 | $126,400 |
If you meet these terms, you don’t have to pay the application fee nor the initial payment. Your monthly installments are also waived while your offer is under consideration.
Offers submitted for deceased individuals or for businesses that aren’t sole proprietorships don’t qualify for Low-Income Certification.
What happens next
There may be extra steps, depending on the IRS’s final decision for your OIC.
Your offer is accepted
If the IRS accepts your OIC, you’ll be responsible for submitting payment in accordance with the method and agreement you adopt. It’s critical that you meet your payment obligations or your OIC may be nullified.
With your OIC, you waive your right to contest the total tax liability due. Any federal tax liens will be released upon full payment in accordance with your OIC.
You’re required to remain in compliance with all tax filings and tax return payments for five years from the date of OIC acceptance; otherwise, your offer will be considered in default.
Your offer is returned
The IRS may return your offer if it’s incomplete or doesn’t meet the requirements. If this happens, you’ll get a letter explaining why.
You can’t resubmit your offer if any of the following applies to your case:
- You have an open bankruptcy case.
- You stopped making payments after submitting the offer.
- You submitted the offer only to delay payment.
- The IRS believes you may take steps to avoid paying, such as hiding assets or leaving the country.
- You're part of another ongoing IRS investigation.
- The original tax bill was already removed or corrected by the IRS.
If your offer is returned for one of these reasons, you may lose the ability to appeal. If none of those conditions apply, the IRS letter may explain how to fix the issue so you can try again.
You’re ineligible
The IRS doesn’t accept all OICs. For example, it typically doesn’t approve offers when it determines that the individual or business is capable of paying off their debt in cash or through assets owned.
If your OIC is denied and you’re deemed ineligible, the IRS will notify you with a letter. Both your application and application fee will be returned. Any payments submitted with your application will be applied toward your outstanding tax bill.
Your offer is rejected
If your offer is rejected, you may file an appeal using a Request for Appeal of Offer in Compromise (Form 13711). You must call the number listed in your IRS letter within 30 days of the date printed on the letter.
You should also submit Form 656-L, Offer in Compromise (Doubt as to Liability), to document your appeal.
It’s important to provide additional documentation or verification to improve your case. You may also contact the offer manager directly to discuss the reason for the rejection or provide more details about your financial situation.
Your appeal is accepted
If your appeal is accepted, you'll need to resubmit your original application package. This includes Form 656 (or a new version if the old one isn’t available) and Form 433-A (OIC) or 433-B (OIC), plus the application fee.
Benefits and drawbacks of the IRS Fresh Start Program
The IRS offer in compromise program has both benefits and drawbacks:
Benefits
- You can choose a payment option: The IRS lets you choose either a lump sum or a periodic payment schedule based on what works best for your situation.
- You may qualify for a break from payments: If you select the periodic payment option and qualify for Low-Income Certification, you aren’t required to make payments during the IRS review period.
- You won’t accrue new interest once your offer is accepted: Once your offer is accepted, no further interest will accrue on your total tax debt or accepted offer amount.
Drawbacks
- Certain restrictions apply: The IRS lists several circumstances that disqualify an OIC, such as an open bankruptcy, failure to make payments or a pending IRS investigation.
- Strict eligibility rules apply: Not everyone qualifies for the OIC Program. Among its requirements, you must have all current and previous tax returns filed with estimated payments made.
- The IRS may file a lien: A Notice of Federal Tax Lien (NFTL) is typically filed after a final decision and released after full payment is made.
FAQ
Are the IRS Fresh Start Program and the offer in compromise the same?
Not exactly. The offer in compromise program has been around for years. The IRS Fresh Start initiative, launched in 2011, made it easier for more people to qualify for an OIC by loosening income and asset rules. Today, many people use the terms interchangeably, but technically, the OIC is one part of what the IRS improved under the Fresh Start initiative.
Is the IRS Fresh Start Program free?
When submitting your OIC, you'll need to submit an application fee of $205 and a nonrefundable initial payment for every Form 656 you file, unless you meet the Low-Income Certification guidelines.
How long does it take to get approved for the program?
According to the IRS, it could take up to 24 months to receive a decision on your OIC.
What happens if I default on a Fresh Start agreement?
If you fail to make your OIC payments as agreed and follow the stated terms, your offer may be canceled, and you'll be found in default.
Is the IRS Fresh Start Program worth it for small businesses?
If a small business has outstanding tax debt that it can't pay, an OIC could reduce the overall tax burden, making it easier to pay. However, there are some drawbacks to the program that require consideration, the biggest of which is that it gives the IRS more time to collect your debt by pausing the usual 10-year limit.
Article sources
ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:
- IRS, “IRS updates tax gap projections for 2020, 2021; projected annual gap rises to $688 billion.” Accessed March 6, 2025.
- IRS, “IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start.” Accessed March 6, 2025.
- IRS, “Offer in compromise.” Accessed March 6, 2025.
- IRS, “Offer in compromise FAQs.” Accessed March 6, 2025.
- Taxpayer Advocate Service, “Collection Statute Expiration Date (CSED).” Accessed July 25, 2025.
