Key Facts About the Fresh Start Program

June 16, 2019

Here at MCC, we provide a range of useful tax and business law services for our clients. Our clients have a diverse set of needs and we take price in delivering results for those needs. But, as with all firms, we tend to concentrate our practice in certain areas more than others. One of our main specialties in IRS tax debt resolution. Many individual and business taxpayers struggle to resolve their back tax debt owed to the IRS.

Tax debt is something which can sneak up on even the most financially savvy people. Sometimes even those who are normally very diligent and conscientious can forget to budget or plan ahead for their tax liability. Certain types of taxpayers are likely at greater risk of running into tax debt. Freelancers, for instance, often run into tax problems because they do not have the benefit of employer withholding. It’s very common for freelancers to put off their tax burden and ultimately be left with an unmanageable tax debt.  

In this post, we will discuss a few facts about the Fresh Start Program (also called the Fresh Start Initiative). We’ve discussed this program before on our blog. This program is very important because it assists taxpayers resolve their back tax debt. Let’s go over some of the key facts about this program in detail. 

First Fact: The Fresh Start Program Helps the IRS 

The Fresh Start Program undoubtedly helps taxpayers. This program gives taxpayers with back tax debt more opportunity to resolve their debt. But there is no question that this program also benefits the IRS. If a taxpayer falls into tax debt, there is no guarantee that the IRS will collect its tax money. This is true no matter how strongly and consistently the IRS hounds and hassles taxpayers. What’s more, the IRS also has an interest in receiving its tax money in a timely fashion.

Settlement v. Installments

In many cases, the IRS prefers settlements over installment plans. This is because installment plans can always go south if the financial circumstances of a taxpayer change over time. With a settlement, the IRS receives less than full face value, but it still receives a sizeable lump sum. And the IRS also removes the issue from its radar and can focus its energy on pursuing other matters.  

The bottom line is this: the Fresh Start Program benefits the IRS just as it benefits taxpayers. The IRS doesn’t want old tax debts to linger on and remain uncollected. The IRS prefers a guaranteed sum for less than full face value rather than the possibility of collecting the full value down the road.  

Second Fact: The Fresh Start Program Reflects Economic Realities 

The Fresh Start Program didn’t just spring up out of nowhere. The initial version of this program began in 2008. This is not at all surprising as this was during the heart of the Housing Crisis. The IRS recognized that economic trends were impeding the ability to taxpayers to take care of back tax debt. The intent of the program was to combat this issue. If taxpayers lack the means to satisfy their debt, then the debt will go unpaid. There is no way to get around this. However, if taxpayers can access debt relief more easily, a higher percentage of old tax debts can be settled and paid.  

The Fresh Start Program was revised in 2012. Again, this was done to reflect issues taking place in the wider U.S. economy. Younger Americans are disproportionately affected by the less than ideal condition of the economy. This is true for younger Americans of various educational and socioeconomic characteristics. These younger Americans will be more likely to take advantage of the Fresh Start Program in the coming years. 

Third Fact: The Fresh Start Program Improves Access to OICs for Taxpayers 

One of the main advantages of the Fresh Start Program is that it loosens the requirements of offers-in-compromise (OICs). An OIC is an agreement between the IRS and the taxpayer to settle a debt for less than full face value. Essentially, taxpayers submit a settlement offer. The IRS then reviews the offer for acceptability, according to very specific metrics. The IRS looks at a taxpayer’s present income, assets, tax debt amount, living expenses and other debts. 

Reasonable Collection Potential

Combined together, these variables produce a taxpayer’s “reasonable collection potential,” which is the amount which the IRS can reasonably expect to extract. The Fresh Start Program alters how the IRS treats these different variables. For instance, the FSP changes what a taxpayer can channel toward allowable living expenses. The program also changes which taxpayer assets too include for RCP calculation purposes. What’s more, the program changes how future income is viewed for RCP calculation purposes. All of these changes make OICs more accessible for taxpayers. 

Call Us Today For Your Fresh Start!

These are three critical facts about the Fresh Start Program. As we can see, the program is a multifaceted system. Undoubtedly, it benefits taxpayers, but it’s also beneficial for the IRS too. The Fresh Start Program can get a bit complex when considered in its entirety. It’s important that taxpayers consult with a qualified attorney when attempting to navigate through this system. At Mackay, Caswell & Callahan, P.C., we take pride in our master of this program and of our expertise in tax debt resolution. Dealing with the IRS regarding tax debt is something almost no taxpayer should do on his or her own. If you have a tax debt issue, contact one of our top New York City tax attorneys for assistance today. 

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