If you’re a New York taxpayer struggling with IRS debt, you’re not alone. About 18.6 million individual taxpayers owe debt to the revenue service, showing how many Americans need relief programs to regain control of their finances.
The so-called “IRS Fresh Start Program” isn’t actually a single program but rather a collection of tax relief options that can help you manage overwhelming tax debt. Understanding these options could save you thousands of dollars and years of financial stress.
What Is the IRS Fresh Start Program?
The IRS Fresh Start Program is a series of policy changes the IRS made starting in 2011 to make existing tax relief options more accessible. These changes weren’t new programs but improvements to existing relief options like installment agreements, offers in compromise, and penalty abatement. The goal was to help taxpayers who were struggling financially due to economic hardships.
Bottom line: The Fresh Start Program makes it easier to qualify for tax relief, but you need to know which option fits your situation.
Facts and Figures: What You Need to Know About IRS Fresh Start
Before diving into your options, it’s important to understand the numbers. The IRS accepted only 7,199 out of 33,591 offers in compromise (OICs) in 2024, showing that not every taxpayer will qualify for debt settlement.
This means while settlement options exist, most taxpayers benefit more from payment plans and other relief measures. Let’s explore your five main options.
Option 1: Payment Plans (Installment Agreements)
Payment plans allow you to resolve your tax debt gradually using monthly installments. This is often the most practical solution for New York taxpayers who can’t pay their full balance immediately. The IRS collected more than $16 billion through installment agreements in fiscal year 2024, an increase of more than 12% compared to the prior fiscal year.
Types of Installment Agreements
Guaranteed Installment Agreement
- For debts of $10,000 or less
- Automatic approval if you qualify
- Payment period up to three years
- No financial disclosure required.
Streamlined Installment Agreement
- For debts up to $50,000 (increased from previous thresholds)
- Simplified application process
- Payment period up to 72 months
- No detailed financial statements needed.
Partial Payment Installment Agreement
- For cases where you can’t pay the full amount before the collection statute expires
- Requires detailed financial review
- Monthly payments based on your ability to pay
- Reviewed every two years.
Option 2: Debt Settlement (Offer in Compromise)
An Offer in Compromise (OIC) enables you to resolve your tax debt by paying less than the complete balance due. The IRS normally accepts an offer in compromise when your proposed amount reflects the maximum they can realistically collect within a reasonable timeframe, according to the IRS.
Three Categories of OIC
Doubt About Collectibility
- Most frequently used type
- Applies when you cannot pay the complete balance before the collection period expires
- Determined by your income, expenses, and asset values.
Doubt About Liability
- Applies when there is legitimate disagreement regarding whether you owe the tax
- Legal dispute concerning the debt amount.
Effective Tax Administration
- You owe the tax and have the ability to pay, but payment would cause exceptional hardship
- Rarest form of offer.
OIC Eligibility Criteria
To be eligible for an offer in compromise, you must:
- Submitted all mandatory tax returns and made all required estimated payments
- Not currently be involved in an active bankruptcy case
- Have received billing for at least one tax debt that you’re including in your offer
- Stay up-to-date with estimated tax payments for the current year.
The IRS determines your offer amount through this calculation: Your available income multiplied by 12 or 24 months, plus your asset equity.
Option 3: Currently Not Collectible Status (CNC)
The “Currently Not Collectible” status offers temporary relief if paying your tax debt would result in significant financial hardship. CNC status allows a taxpayer to find Fresh Start tax relief in peace, without the IRS coming after them.
How the CNC Status Works
- IRS suspends collection activities.
- No wage garnishments or bank levies.
- Interest and penalties continue to accrue.
- Your financial situation is reviewed periodically.
- Collection can resume if your finances improve.
This option works well for New York taxpayers facing unemployment, medical emergencies, or other temporary financial crises.
Option 4: Penalty Abatement
Penalty abatement can reduce or eliminate penalties for late filing, late payment, or failure to deposit taxes. This relief can save you significant money, especially if penalties make up a large portion of your debt.
Categories of Penalty Relief
First-Time Penalty Abatement
- Available when you have a clean compliance record
- Can eliminate failure-to-file and failure-to-pay penalties
- Must have submitted all required returns and paid current year taxes.
Reasonable Cause Abatement
- Available when you can demonstrate reasonable cause for non-compliance
- Examples include natural disasters, severe illness, or unavoidable absence
- Requires documentation to substantiate your claim.
Option 5: Tax Lien Withdrawal
The Fresh Start Program made it easier to get federal tax liens withdrawn from public records. When you owe $25,000 or less, the IRS will allow tax lien removal if: 1) you agree to a direct debit installment plan of six years, and 2) you complete three consecutive monthly payments.
Benefits of Lien Withdrawal
- Improves your credit score
- Makes it easier to get loans or mortgages
- Removes the lien from public records
- Helps with employment background checks.
Who Qualifies for Fresh Start Options?
Eligibility varies by program, but general requirements are that you must:
- Have filed all required tax returns for the previous three years
- Stay current with estimated tax payments
- Not be involved in tax fraud or evasion
- Demonstrate financial hardship for certain programs.
For New York taxpayers, your state tax situation doesn’t typically affect federal Fresh Start eligibility, but having both federal and state tax issues can complicate your overall financial strategy.
When to Apply for Fresh Start Relief
The best time to pursue Fresh Start options is before the IRS takes collection action. Once you receive collection notices, you typically have limited time to respond before facing collection actions like:
- Bank account levies
- Wage garnishment
- Asset seizure
- Federal tax liens,
Acting quickly protects your assets and gives you more negotiating power with the IRS.
Common Mistakes to Avoid
- Don’t wait until crisis mode. Many New York taxpayers wait until they receive final notices before seeking help. Earlier action provides more options and better outcomes.
- Don’t try complex cases alone. While simple payment plans can be set up online, offers in compromise and penalty abatement often require professional assistance to maximize your chances of approval.
- Avoid scams. The Internal Revenue Service warns taxpayers to be cautious of promoters who claim their services are essential to resolve unpaid taxes but charge excessive fees, often with no results. Be wary of “pennies on the dollar” promises.
Important Statistics for New York Taxpayers
During Fiscal Year (FY) 2024, the IRS gathered more than $5.1 trillion in gross taxes, collected over $98 billion through enforcement, and distributed $553 billion in tax refunds. This massive operation processes millions of relief requests annually.
Understanding the volume helps explain why having professional representation often leads to better outcomes. The IRS processes these applications systematically, and knowing how to present your case properly makes a significant difference.
Professional Representation Makes a Difference
The complexity of tax law and IRS procedures means having experienced representation often determines the difference between success and failure. An attorney who specializes in tax resolution understands:
- Which relief option best fits your situation
- How to present your financial information effectively
- How to negotiate with IRS agents
- How to handle appeals if your initial application is denied.
John D’Amato has nearly 30 years of experience helping New York taxpayers resolve IRS problems. His clients have consistently praised his thorough approach and ability to explain complex tax issues in understandable terms.
As one client from Cheektowaga noted: “John and Margaret were always there for me… John always treated me with respect and professionalism. It was an extremely stressful period for me and he consistently made me feel at ease. I cannot thank him enough for providing me this fresh start.”
Resolve Your Tax Debt. Get Legal Help From John D’Amato.
Don’t allow tax debt to dictate your life. The IRS Fresh Start options provide real solutions for New York taxpayers facing financial hardship. Whether you need a simple payment plan or a complex offer in compromise, taking action now protects your assets and gives you a path forward.
The key is understanding which option works best for your specific situation and ensuring your application is handled correctly the first time.
Ready to explore your Fresh Start options? John D’Amato, PLLC is a top-rated New York tax resolution firm with a proven track record of helping taxpayers achieve favorable outcomes with the IRS.Don’t face the IRS alone. Call (716) 703-9099 today for a confidential consultation about your Fresh Start options. Attorney John D’Amato and his experienced team can evaluate your situation and assist you on the best path forward to resolve your tax debt and restore your peace of mind.