What tax relief options does the IRS Fresh Start Program include?
The Internal Revenue Service introduced the Fresh Start initiative in 2011 to expand access to existing tax relief options. Rather than being a single program, Fresh Start is a group of tools designed to make tax debt easier to manage.
The best option depends on your financial situation. Some taxpayers may qualify to reduce what they owe, while others may only be eligible to delay or restructure payments.
Offer in compromise
An offer in compromise is one of the most well-known Fresh Start options. The program makes it easier for some taxpayers to resolve their balance for less than they owe.
The OIC program 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.
Installment agreements
An installment agreement is the best option if you can pay your full balance, but need to spread it out over time. Here’s how it works:
- Make monthly payments instead of paying in full upfront.
- Streamlined plans are available for balances of $50,000 or less.
- Often, no detailed financial paperwork is required.
- Terms can extend up to 72 months.
You’ll still pay your full balance plus interest and penalties, but payments are more manageable and can help you avoid collections.
Currently Not Collectible (CNC) status
This is best for those experiencing temporary financial hardship. Here’s how it works:
- Pauses collections like levies and wage garnishments
- Requires proof that you can’t cover basic living expenses
- Typically involves submitting Form 433-A to prove financial hardship
CNC is temporary. The IRS may review your finances later, and interest and penalties continue to accrue.
Penalty abatement
Penalty abatement is best for those who have been charged penalties for the first time and want to reduce the amount they owe. Here’s how it works:
- First-Time Abatement (FTA) for those with a clean filing history
- “Reasonable cause” relief for events like illness or disasters
- Can lower your total balance
This doesn’t erase your tax debt or interest, but it can make repayment easier.
Tax lien and levy withdrawal
This option is best for those who wish to remove or avoid collections. Here’s how it works:
- The IRS may file a tax lien on unpaid debt.
- Entering a direct debit installment agreement may qualify you for lien withdrawal.
- Levies (like wage garnishments) may be released with a payment plan or hardship status.
A withdrawal removes the lien from the public record, but you’re still responsible for the debt.
» LEARN MORE: What is the IRS hardship program?
Eligibility requirements for the IRS Fresh Start Program
Eligibility requirements depend on the program you apply for, but there are a few baseline requirements that apply across most IRS relief options:
- You must be current on all required tax filings.
- You must have made the required estimated tax payments for the current year.
- You can’t have an open bankruptcy case.
Offer in compromise eligibility requirements
For the OIC specifically, the IRS has strict eligibility rules:
- All required tax returns must be filed, and all required estimated payments must be 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.
To explore your options, you can create an online account with the IRS and review eligibility for different relief programs. The IRS also provides tools to help you determine whether you may qualify for an OIC or a payment plan, including the IRS offer in compromise Pre-Qualifier.
Eligibility requirements for other relief options
Requirements depend on the specific relief option you need:
- Installment agreements generally require that your total balance fall within certain thresholds (often $50,000 or less for streamlined plans).
- Currently not collectible (CNC) status requires proof of financial hardship through detailed income and expense documentation.
- Penalty abatement may require a clean compliance history or proof of reasonable cause.
How to apply for the IRS Fresh Start Program
Because the Fresh Start initiative includes multiple programs, there isn’t a single application process. Here’s how to get started with the most common options:
- Installment agreements: You can apply online through the IRS website, by phone or by mail. Many taxpayers qualify for streamlined plans without having to submit detailed financial forms.
- Currently not collectible (CNC) status: You’ll need to provide financial information — often using Form 433-A — to show that you can’t afford to make payments.
- Penalty abatement: You can request relief by phone, by mail or by including a written explanation with your tax filing, depending on the situation.
Applying for an offer in compromise
The OIC has a more involved application process than other Fresh Start options. To apply, you’ll need to submit a complete 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
For step-by-step directions and the required OIC forms, review Form 656-B, the offer in compromise booklet.
OIC payment options and requirements
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 the periodic payment option, you must continue making monthly payments while the IRS reviews your offer. Missing a payment can lead to denial and may limit your ability to appeal.
Any payments you submit with your application are nonrefundable and will be applied to your tax debt if your offer is denied. Interest and penalties continue to accrue during review, and you must stay current on all required tax filings and payments. Once accepted, the terms of your offer are final and can’t be changed or extended.
Where to submit an OIC application
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
How to qualify for 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
2026 Low-Income Certification limits
Here are the 2026 income limits based on 250% of the federal poverty guidelines.
| Family size | Income limit |
|---|---|
| 1 | $39,125 |
| 2 | $52,875 |
| 3 | $66,625 |
| 4 | $80,375 |
| 5 | $94,125 |
| 6 | $107,875 |
| 7 | $121,625 |
| 8 | $135,375 |
If you meet these terms, you don’t have to pay the application fee or the initial payment. Your monthly installments are also waived while your offer is under consideration. Note that offers submitted for deceased individuals or for businesses that aren’t sole proprietorships don’t qualify for Low-Income Certification.
What happens after filing for an offer in compromise?
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 apply 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 with assets they own.
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 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.
Pros and cons of the IRS Fresh Start Program
The IRS Fresh Start initiative includes several relief options, each with its own benefits and trade-offs.
Pros
- Multiple relief options, including payment plans, settlements and hardship status
- Flexible repayment through monthly installment agreements
- Potential to settle for less with an offer in compromise
- Collection relief options, such as paused payments in hardship cases
- Possible penalty reduction through abatement programs
Cons
- Eligibility requirements vary and can be strict
- Not all taxpayers qualify for every option, especially settlements
- Interest and penalties may continue in some programs
- Application processes can be time-consuming and require documentation
- The IRS may still file a tax lien in certain cases
FAQ
Are the IRS Fresh Start Program and the offer in compromise the same?
No. The Internal Revenue Service Fresh Start initiative is a group of tax relief options, including installment agreements, penalty abatement, hardship status and the offer in compromise. The OIC is just one part of the program and focuses specifically on settling tax debt for less than you owe.
Is the IRS Fresh Start Program free?
It depends on the option you choose. Some relief options, like installment agreements or penalty abatement requests, may have low or no upfront costs. Others, like an offer in compromise, require a $205 application fee and an initial payment, unless you qualify for Low-Income Certification.
How long does it take to get approved for the program?
Timelines vary by program. Installment agreements can often be approved quickly, sometimes within days if you apply online. More complex options, like an offer in compromise, can take several months to up to 24 months for a final decision.
What happens if I default on a Fresh Start agreement?
If you miss payments or fail to stay current on tax filings, the IRS may cancel your agreement. This can apply to installment plans, OICs, or other arrangements and may result in renewed collection actions, such as penalties, liens or levies.
Is the IRS Fresh Start Program worth it for small businesses?
It can be, depending on your situation. Small businesses may benefit from payment plans, penalty relief or, in some cases, settling debt through an OIC. However, each option has trade-offs, such as ongoing interest or strict eligibility requirements, so it’s important to choose the one that fits your cash flow and long-term finances.
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: The Tax Gap.” Accessed April 24, 2026.
- IRS, “IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start.” Accessed April 24, 2026.
- IRS, “Offer in Compromise.” Accessed April 24, 2026.
- IRS, “Offer in Compromise FAQs.” Accessed April 24, 2026.
- Taxpayer Advocate Service, “Collection Statute Expiration Date (CSED).” Accessed April 24, 2026.
