Question 1

How much can the IRS Fresh Start Program reduce my tax debt?

Accepted Answer

The amount depends on which program you qualify for and your specific financial situation. Through an Offer in Compromise, some taxpayers reduce their debt by 90% or more, settling for pennies on the dollar.

However, the IRS doesn't just hand out these settlements. You must prove you can't pay the full amount due to financial hardship and that the offered amount represents your maximum collection potential. Most taxpayers who qualify owe between $10,000 and $50,000 and have limited income and assets.

If you don't qualify for an Offer in Compromise, penalty abatement can still save you thousands by removing penalties that may have doubled your original debt. Even installment agreements provide relief by stopping additional penalties and giving you affordable monthly payments.

Question 2

What happens to collection actions once I apply for Fresh Start?

Accepted Answer

The IRS generally suspends most collection activities while your Fresh Start application is being processed. This means no more threatening letters, phone calls, or wage garnishment notices during the review period.

However, the IRS doesn't stop the clock on interest and penalties during this time, and they may still file a federal tax lien if they haven't already. That's why it's crucial to have your application prepared correctly the first time to avoid unnecessary delays.

If your application is approved, collection actions remain suspended as long as you comply with your agreement terms. If you default on an installment agreement or violate the terms of an Offer in Compromise, the IRS can resume full collection activities immediately.

Question 3

Do I need to file all my back tax returns before applying?

Accepted Answer

Yes, you must be current on all required tax filings before the IRS will consider any Fresh Start application. This is non-negotiable - the IRS wants to see that you're committed to compliance going forward.

If you have unfiled returns, we can help you get caught up quickly. We'll prepare and file all missing returns, often using IRS transcripts and third-party records to reconstruct your tax information if you don't have all your documents.

The good news is that once we file your returns, any refunds you're owed can be applied to reduce your overall tax debt. Many clients are surprised to discover they're owed refunds for some years, which significantly reduces what they actually owe the IRS.

Question 4

How long does the Fresh Start application process take?

Accepted Answer

The timeline varies depending on which program you're applying for and how complete your financial documentation is. Streamlined installment agreements for debts under $50,000 can be approved in as little as 30-60 days.

Offer in Compromise applications take longer, typically 6-12 months for the IRS to review and make a decision. The process can be extended if the IRS requests additional documentation or if you need to appeal an initial rejection.

Currently-Not-Collectible status can often be obtained within 30-90 days if you clearly meet the financial hardship criteria. Penalty abatement requests vary widely but are often resolved within 60-120 days depending on the complexity of your case and the reasons for the penalties.

Question 5

What if the IRS rejects my Fresh Start application?

Accepted Answer

Rejection doesn't mean the end of the road. Most rejections happen because the application wasn't prepared correctly or didn't include sufficient supporting documentation. We can often address these issues and resubmit.

You also have the right to appeal any IRS decision to the Office of Appeals, an independent division within the IRS. Appeals often result in more favorable outcomes because appeals officers have more flexibility than the initial reviewers.

If all Fresh Start options are exhausted, we can explore other alternatives like Currently-Not-Collectible status, partial payment installment agreements, or waiting for the collection statute of limitations to expire. There's almost always a path forward, even if it's not the one you originally hoped for.

Question 6

Should I try to handle this myself or hire a professional?

Accepted Answer

You can technically apply for Fresh Start programs yourself, but the success rate is significantly lower without professional representation. The IRS receives thousands of applications, and those prepared by experienced tax professionals have much higher approval rates.

The paperwork is complex, the financial disclosure requirements are extensive, and one mistake can result in automatic rejection. More importantly, we know how to present your case in the most favorable light and which programs you're most likely to qualify for.

Would you go to court without a lawyer? Of course not. Then why would you go before the IRS without a trusted tax professional? The stakes are too high and the process too complex to risk handling alone, especially when professional help is available with flexible payment options.

IRS Fresh Start Program Westcolang, PA