A Complete Guide to the IRS Fresh Start Program 2025

When you live abroad, it’s easy to fall out of compliance with IRS tax laws. One of the programs designed to help taxpayers get back on track is the IRS Fresh Start Initiative.

If you’ve missed a few filings or struggled to pay your taxes on time, you may now be facing a growing balance of back taxes, penalties, and interest. The longer you wait, the more the IRS adds to your bill, and the more aggressive they may become in collecting what you owe.

Whether you need more time to pay, want to reduce penalties, or are hoping to settle for less than you owe, the Fresh Start Initiative could be your way forward.

What Is the Problem with Tax Debt?

The IRS requires all U.S. taxpayers, including expats, to file their tax returns and pay any taxes owed. If you don’t meet these obligations, you could face serious consequences. For most taxpayers, failing to file or pay on time leads to penalties and interest that continue to accumulate over time.

To collect unpaid taxes, the IRS can also take aggressive actions, including wage garnishment, tax liens, and seizure of bank accounts. That’s why it’s never a good idea to ignore your tax debt. Even if you can’t pay it in full right now, it’s best to find a way to address it as soon as possible.

What Is the IRS Fresh Start Initiative?

The IRS launched the Fresh Start Initiative in 2011 to help taxpayers who were struggling financially after the 2008 economic crisis. It was one of the first programs created to offer real relief for those dealing with back taxes. The initiative introduced a range of options for both individuals and businesses.

The goal of the Fresh Start Program is to provide taxpayers with a way to manage large tax bills they can’t pay all at once. Depending on your situation, you may be able to pay off your balance over time, reduce the total amount you owe, or even remove tax liens and penalties.

These programs aren’t available to everyone, and qualifying can be tricky. That’s why it’s a good idea to work with a tax professional if you’re considering applying for relief under the Fresh Start Program.

Fresh Start Relief Options

Here’s a closer look at the most common programs under the Fresh Start program, who qualifies for them, and how to apply.

1) Installment Agreement (IA)

If you can’t pay your full tax bill all at once, an Installment Agreement lets you break it into monthly payments over time. This option is available to individual taxpayers who owe up to $100,000 in combined taxes, penalties, and interest.

You can pay off the balance in monthly installments over up to 72 months. Depending on how much you owe:

• No financial statement is required if your balance is $100,000 or less and you agree to direct debit payments.
• If you owe less than $25,000, direct debit isn’t mandatory. However,  it’s recommended to prevent default or future collection action.
• For amounts over $100,000, you may still qualify, but you’ll need to provide more detailed financial information.

Once your agreement is approved, the IRS will pause collection actions such as wage garnishments, bank levies, and tax liens. This gives you space to catch up without added pressure or threats to your assets.

How to Apply for an Installment Agreement

You can apply online using the IRS Online Payment Agreement tool. If you prefer to apply by mail, complete Form 9465 and send it to the IRS. For amounts over $100,000 or more complex situations, you may need to include a Form 433-A or 433-F to provide additional financial information.

2) Offer in Compromise (OIC)

An Offer in Compromise lets you settle your tax debt for less than what you owe. It’s often marketed as a “pennies on the dollar” solution, but only if you genuinely can’t pay in full. The IRS won’t approve an offer just because it’s low. They’ll only accept it if they believe it’s the maximum they can reasonably expect to collect based on your financial situation.

Fresh Start updates made the OIC program more flexible:

• The IRS now considers 1 to 2 years of future income, rather than 4 to 5 years, making it easier to qualify.
• It expanded the criteria for allowable living expenses, providing taxpayers with more flexibility in their monthly budgets.
• It also streamlined the process for many applicants, especially those facing financial hardship.

Please note that not everyone qualifies. But if you’re facing severe financial hardship, this could be the best route to true tax debt relief.

How to Apply for an Offer in Compromise

Start by using the IRS Offer in Compromise Pre-Qualifier Tool to check your eligibility. If you qualify, you’ll need to complete:

• Form 656, Offer in Compromise
• Form 433-A (OIC) or 433-B (OIC) for businesses, which includes your full financial disclosure

These forms, along with a non-refundable application fee (currently $205 as of 2025) and your initial offer payment, must be submitted together. You can mail the full package to the address listed in the IRS instructions.

3) Penalty Abatement

If your balance has ballooned due to penalties, you may be eligible to request penalty relief, also known as penalty abatement. The IRS can waive certain penalties for failing to file, failing to pay, or failing to deposit taxes on time, especially if you’ve been compliant in the past or have a reasonable cause.

You may qualify if:

• You had a clean tax record for the past three years
• You were impacted by events outside your control, such as illness, natural disasters, or bad advice from a tax professional or the IRS itself.

Penalty abatement won’t erase the underlying tax debt or interest, but it can significantly reduce what you owe. If penalties make up a big chunk of your tax bill, this is worth exploring.

How to Apply for Penalty Relief

You can request penalty relief in several ways:

• By phone: For many first-time penalty abatement requests, calling the IRS directly is often sufficient.
• By mail: Submit a written request explaining why you believe you qualify.
• Online: Some taxpayers may qualify to request relief through their IRS online account.

In more complex situations, such as requesting penalty relief due to reasonable cause, supporting documentation will be required. If denied, you may appeal the decision.

4) Tax Lien Withdrawal

A federal tax lien gives the IRS a legal claim to your property when you owe taxes. But Fresh Start raised the filing threshold from $5,000 to $10,000, making it less likely the IRS will file liens for smaller debts.

Better yet, if you’ve already had a lien filed, the IRS may withdraw it entirely if you:

• Pay your full balance
• Or set up a direct debit installment agreement and stay current

Lien withdrawal improves your credit profile and removes public notice of the lien, which can be crucial if you’re applying for a mortgage or business loan.

How to Apply for Lien Withdrawal

Once you’ve paid in full or are on an approved direct debit plan, file Form 12277, Application for Withdrawal of Filed Form 668(Y), Notice of Federal Tax Lien. You’ll need to include details about the original lien and explain why withdrawal is in the government’s best interest (such as enabling you to secure financing and remain compliant).

How to Qualify for the IRS Fresh Start Initiative

Before you can take advantage of any relief under the IRS Fresh Start Initiative, you’ll need to meet some basic eligibility requirements. While each relief option has its specific criteria, there are a few general rules that apply across the board.

To qualify for the Fresh Start program, you must:

• No open bankruptcy cases – You won’t be eligible for Fresh Start relief if you’re currently in bankruptcy.
• Timely federal tax deposits – If you run a business with employees, you must be current on all required federal tax deposits.
• Up-to-date estimated payments – If you’re a small business owner or self-employed, you need to have made all estimated tax payments for the current year.
• All returns filed – You must file all required tax returns, past and present, whether or not you’re able to pay the full amount owed.
• Proof of financial hardship – To qualify for certain types of relief, you’ll need to show that you’re either unable to pay your balance in full or that doing so would create a severe financial strain.

Meeting these baseline requirements is the first step toward getting approved for any IRS Fresh Start relief. If you’re unsure whether you qualify, a tax professional can help you assess your situation and guide you through what to do next.

Which Fresh Start Option Is Right For You?

Each relief option under the IRS Fresh Start Initiative serves a different purpose, and not every one will be the right fit for your situation. Depending on how much you owe, your current income, assets, and ability to pay, one option may be more beneficial than another. In some cases, you might even qualify for more than one type of relief.

Since it can be challenging to determine which IRS Fresh Start Program option is best for you, it’s worth consulting a tax professional before applying. A qualified tax expert can review your specific circumstances, explain which options make the most sense, and guide you through the application process.

Working with someone who understands the intricacies of these programs can save you time, reduce your stress, and increase your chances of a successful outcome.

What Are The Benefits Of Working With A Tax Professional For The Fresh Start Initiative

It is possible to apply for tax relief on your own. However, for most taxpayers, it is better to work with a tax professional. This is especially true for expat taxpayers, who often face unique situations regarding back taxes and delinquent tax returns.

Some of the benefits of working with a tax professional to apply for programs under the IRS Fresh Start Initiative include:

1. In-Depth Knowledge and Expertise: Tax professionals are familiar with the intricacies of the IRS Fresh Start Initiative, including the eligibility requirements, necessary forms, and required documentation. They’ll make sure you’re aware of all your options and help you make informed decisions from the start.
   
2. Accurate and Compliant Applications: Filing on your own increases the risk of errors, which can delay or derail your relief request. A tax professional will ensure that your forms are completed correctly, deadlines are met, and all necessary paperwork is submitted to the IRS.
   
3. Step-by-Step Guidance: Some relief options involve lengthy applications or negotiations. A tax expert can walk you through each step, from choosing the right program to finalizing your payment plan, so you stay on track and avoid unnecessary roadblocks.
   
4. Strategic Protection: Applying for tax relief often means sharing sensitive financial information. A professional can assess whether any disclosures might raise red flags and advise you on how to protect yourself from future audits or investigations.
   
5. Higher Approval Chances: The IRS doesn’t accept every request for tax relief. However, tax professionals are aware of what the IRS looks for and what leads to denials. Their experience can improve your chances of approval and help you avoid common mistakes that lead to rejected applications.
   
6. Better Outcomes: If you qualify for more than one relief option, a professional can recommend the most beneficial path based on your situation. They can also help you negotiate more favorable terms, such as reducing your Offer in Compromise payment, so you save more in the long run.

Contact Tax Samaritan

At Tax Samaritan, we are a boutique tax firm serving United States taxpayers living and working abroad. We understand all the complex tax laws that apply to expatriate taxpayers. We also have extensive experience helping clients apply for and utilize tax relief programs under the IRS Fresh Start Initiative.

Expat taxpayers often have delinquent taxes and returns for various reasons. Whatever your situation may be, we can help you explore the best tax relief option. We can also guide you through the application and repayment process.

Book a free 30-minute consultation today to discuss your tax situation.