IRS Fresh Start Program and Forgiveness

The IRS Fresh Start program explained

You have heard on the radio and seen on TV advertisements for what the spokesperson usually calls the Fresh Start Program, Fresh Start Initiative, or Tax Forgiveness Program. We feel compelled to educate the public about what this program is, and more importantly, what the IRS Fresh Start is not, because we hear unlicensed tax consultants at many tax relief companies often tell people they qualify for big savings (liability forgiveness, whatever that is) on taxes, penalties, and interest to the IRS. This is a big red flag. Some people can, but most people will not get a big fat gift from IRS HQ in Washington, DC.

Quick Tip: If someone from a tax relief company tells you that you qualify for an Offer in Compromise or their firm can eliminate penalties and interest, hang up the phone unless that person is a CPA, Enrolled Agent or an attorney, and will put their opinion in writing.  The reality is that 99% of people who owe the IRS back taxes do not qualify for a reduction. This is important because if you apply for an Offer in Compromise and when you are denied a year or two later like most, you will be on the hook for all the tax plus all the interest from the past year or two!  A good tax relief company can save you time and money in another way but not by selling dreams and miracle savings.

“IRS Fresh Start,” the official name given by the IRS

The IRS Fresh Start program was designed to allow those who owe taxes to pay their taxes and avoid a tax lien in the process. Here are the key features of the IRS Fresh Start:

  • The IRS raised the limit of what you can owe before they file a tax lien
  • The IRS raised the limit of how much you can owe and be eligible, without submitting a full financial statement, to the IRS for a 6-year payback of all your taxes. There is no reduction in taxes or interest, just an easier path to getting a formal payment arrangement and thus avoiding liens and seizures.
  • Expanding the Offer in Compromise (reduced settlement, pennies on the dollar, forgiveness) to include extra considerations for the following:
    • Revising the calculation for the taxpayer’s future income.
    • Allowing taxpayers to repay their student loans.
    • Allowing taxpayers to pay state and local delinquent taxes.
    • Expanding the Allowable Living Expense allowance category and amount.
From the IRS:The IRS will not accept an offer if it believes that the taxpayer can pay the amount owed in full as a lump sum or through a payment agreement. The IRS looks at several factors, including the taxpayer’s income and assets, to make a decision regarding the taxpayer’s ability to pay. To apply you must submit extensive financial statements detailing all your income, expenses and assets. The IRS doesn’t just forgive liability because you ask nicely.

How do Allowable Living Expenses work?

The IRS has allowable expenses based on the number of people in the household and by county. County to county differences across the United States vary by a factor of over three. This is because income levels vary so much county to county and even state to state.

Below is a table of just the differences in average incomes by state, for 2014, the last year the IRS published the data.

State Individual Tax
Returns Filed
Total Adjusted
Gross Income
Average AGI
Alabama 2,046,560 $107,936,740,000 $52,741
Alaska 361,130 $24,272,390,000 $67,212
Arizona 2,845,710 $161,928,643,000 $56,903
Arkansas 1,223,140 $65,054,335,000 $53,186
California 17,411,400 $1,287,368,304,000 $73,938
Colorado 2,553,250 $179,600,634,000 $70,342
Connecticut 1,749,470 $164,110,851,000 $93,806
Delaware 443,820 $27,516,019,000 $61,998
Washington DC 336,950 $29,796,594,000 $88,430
Florida 9,398,920 $570,292,720,000 $60,676
Georgia 4,378,120 $253,487,684,000 $57,899
Hawaii 681,840 $39,689,089,000 $58,209
Idaho 701,990 $36,997,279,000 $52,703
Illinois 6,131,110 $424,188,653,000 $69,186
Indiana 3,078,750 $166,637,525,000 $54,125
Iowa 1,445,570 $86,096,947,000 $59,559
Kansas 1,336,440 $83,259,525,000 $62,299
Kentucky 1,891,820 $98,331,729,000 $51,977
Louisiana 2,007,830 $115,571,432,000 $57,560
Maine 638,280 $34,159,794,000 $53,519
Maryland 2,935,560 $213,549,098,000 $72,746
Massachusetts 3,343,720 $285,581,083,000 $85,408
Michigan 4,685,320 $266,767,393,000 $56,937
Minnesota 2,687,780 $184,514,005,000 $68,649
Mississippi 1,243,420 $57,992,430,000 $46,639
Missouri 2,767,370 $156,727,536,000 $56,634
Montana 492,010 $27,178,486,000 $55,240
Nebraska 889,100 $54,867,033,000 $61,711
Nevada 1,321,700 $77,642,876,000 $58,745
New Hampshire 685,010 $47,606,625,000 $69,498
New Jersey 4,342,620 $353,247,794,000 $81,344
New Mexico 911,750 $46,264,952,000 $50,743
New York 9,523,840 $754,932,479,000 $79,268
North Carolina 4,380,810 $247,012,395,000 $56,385
North Dakota 370,570 $27,236,634,000 $73,499
Ohio 5,559,950 $313,149,940,000 $56,322
Oklahoma 1,639,860 $97,488,903,000 $59,450
Oregon 1,826,550 $109,310,786,000 $59,845
Pennsylvania 6,169,090 $388,883,451,000 $63,037
Rhode Island 521,890 $32,511,563,000 $62,296
South Carolina 2,124,300 $111,386,099,000 $52,434
South Dakota 410,920 $24,938,776,000 $60,690
Tennessee 2,928,360 $161,050,478,000 $54,997
Texas 11,992,010 $806,504,418,000 $67,253
Ohio 1,221,670 $74,268,005,000 $60,792
Vermont 322,860 $18,588,007,000 $57,573
Virginia 3,871,680 $279,345,572,000 $72,151
Washington 3,342,750 $244,055,829,000 $73,010
West Virginia 782,960 $39,461,888,000 $50,401
Wisconsin 2,811,290 $167,540,416,000 $59,596
Wyoming 279,930 $21,658,081,000 $77,370
National Average 147,048,750 $9,647,559,918,000 65,608


A reputable tax relief company definitely can help you with your tax problem. They can make sure you do not pay more base tax, penalties or interest than you legally owe, and often, more importantly, protect your income and assets from aggressive IRS (or state) collections while your tax issues are negotiated. In some instances, you can pay a lot less than the government wants but before believing the hype or pitch about “IRS Programs,” it is crucial that you speak to licensed professionals to assess your situation.

If you are having doubts or want to know more about the IRS Fresh Start and “Forgiveness” (the Offer in Compromise) you may read the full unedited text about the IRS Fresh Start, straight from the IRS. Boring but very important reading if you have been told you qualify for savings that you probably do not qualify for.

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