IRS announces Fresh Start Initiative

The IRS said this spring that they will be expanding the Fresh Start Initiative.

The initiative includes easier parameters for taxpayers to qualify for an Offer in Compromise (OIC) or an Installment Agreement. It also offers penalty relief for qualifying unemployed taxpayers.

Save on Penalties and InterestWhen the new policy changes take place the Fresh Start Initiative could save taxpayers a lot of money by reducing or eliminating late penalties and accumulated interest charges.


Policy ChangesAlthough policy changes have been announced, we have not seen changes on actual IRS documentation yet.


The IRS says that they will now waive failure-to-pay penalties for six months for taxpayers who owe less than $50K and…

1.) Have been unemployed for 30 consecutive days of the tax year up to the April 16 deadline

2.) Are self employed and have had a 25% decrease in income and make less than $100K a year

Interest will still be charged to the tax debt. The principle balance and interest must be paid in full by October to avoid paying penalties.


According to the IRS, standards for calculating a reasonable Offer in Compromise (OIC) will be more flexible and we will see a decrease in application processing time, which in the past could take 6 months-2 years.

National Standards have made calculating offers difficult for many taxpayers that assumed that ‘living expenses’ was clearly the amount of money they actually spent on housing, transportation, food and clothing. This is not the case and the IRS has been very strict in enforcing National Standards in calculating allowable living expenses. They did not allow any unsecure debt payments to be included.

The Fresh Start initiative now provides a miscellaneous portion of the application that allows taxpayers to include some of their unsecure debt into allowable living expenses. The COIC is now supposed to be more willing to accept higher costs of living and more lenient when considering the cost of living in certain areas. 

When calculating an appropriate offer the COIC will multiply a final monthly income, after allowable expenses, by 48 or 60. According to the IRS’s Fresh Start initiative, they will now be multiplying the less rigid calculation by 12 or 24, depending on the amount of time you will take to pay off your debt.


In the past Installment Agreements were easier to obtain if you owed less than $10K. If you owed more than $25K you would not qualify to make installments at all. New policies of the Fresh Start initiative require the IRS to agree to installments if a taxpayer owes less than $10K and has been in compliance for five years.

The maximum a taxpayer can owe to qualify for an Installment Agreement has gone up from $25K to $50K. Provisions of the initiative allow a taxpayer who owes more than $50K to pay down their debt to $50K and make installments for the remaining balance.

Now more than ever, Installment Agreements and Offers in Compromise will protect indebted taxpayers from relentless penalties, wage garnishments, bank levies and property liens.

Contact an OMG Tax professional today and find out if an Offer in Compromise or Installment Agreement can help resolve your IRS tax nightmare.

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