To make it easier for taxpayers and small businesses to settle tax debt and avoid tax liens, wage garnishment, and bank account levies, the IRS launched the Fresh Start Initiative.
Programs and relief that make up Fresh Start in 2024 include monthly installment agreements, Offer in Compromise (OIC), higher tax lien thresholds, and more flexible payment terms. In addition, the IRS can provide penalty relief for taxpayers who can show they are financially stressed.
Who Is Eligible for the IRS Fresh Start Program 2024?
The IRS has an updated requirement for its Fresh Start program. Previously, taxpayers owing $50,000 or less in total taxes plus interest and penalties qualified for installment agreements. Beginning in 2024, taxpayers can now owe up to $100,000 for streamlined agreements.
Other eligibility requirements for the IRS Fresh Start program in 2024 include:
- Taxpayers must have filed all past required tax returns. For example, if someone failed to file a 2022 tax return, they won’t qualify for Fresh Start.
- Taxpayers must have made all estimated tax payments for the current year.
- Taxpayers with active bankruptcy proceedings are usually ineligible. However, the IRS may consider extenuating circumstances in unique cases.
- Taxpayers with a current IRS installment agreement are not eligible unless they redo the existing agreement.
- Taxpayers submitting an OIC must provide financial documents that show they cannot pay the full tax debt.
- Small business owners must have made all required federal tax deposits.
What 2024 IRS Fresh Start Programs Reduce Tax Debt?
Offer in Compromise
An OIC allows taxpayers to reduce a tax debt to an amount that’s less than what’s owed.
In most cases, the IRS approves an OIC when a taxpayer proves they are financially stressed and cannot repay the debt in full. Usually this is when the sum of a taxpayer’s income and assets isn’t enough to cover basic expenses and pay all back taxes.
Penalty Abatement
Penalty abatement reduces or removes penalties for taxpayers with reasonable cause. It can be requested at various stages of the IRS collection process.
Taxpayers must have a legitimate, documented reason before they are approved for this type of relief to reduce tax debt.
What 2024 IRS Fresh Start Programs Have Affordable Monthly Payment Plans?
Installment agreements allow taxpayers to pay off their tax debt over time by making monthly payments they can afford. Installment agreements include short-term (180 days), long-term (two years), guaranteed installment agreements, and streamlined installment agreements.
Once the IRS approves an installment agreement, it will stop collection efforts and penalties. However, the IRS will continue to add interest until the tax balance is zero.
Can You Eliminate IRS Debt with the Fresh Start Program in 2024?
The IRS doesn’t eliminate or forgive tax debt even when due to disability, inability to work, or having no income. Fresh Start is designed to help taxpayers pay off back taxes without adding more financial stress.
However, an Offer in Compromise (see above) could help.
Also, the Collection Statute Expiration Date (CSED) for collecting tax debts is ten years. If the IRS fails to collect a tax debt within ten years, the debt is then removed from a taxpayer’s account.
Although Currently Not Collectible (CNC) status also won’t eliminate someone’s tax debt, it is a Fresh Start option that provides short-term relief from wage garnishments, bank levies, and other IRS collection actions.
Once the IRS grants a taxpayer CNC status, it will reassess the individual’s finances each year to determine when they will need to resume paying taxes. If the IRS thinks a taxpayer in CNC status is financially able to pay off tax debt, the IRS can revoke this status and propose payment plan terms.
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