If you are struggling with back taxes, you’ve likely seen advertisements for the IRS Fresh Start Program promising to settle your debt for "pennies on the dollar." At the same time, you may have heard about an Offer in Compromise (OIC).
Are they two different programs? Which one should you apply for?
The short answer: The Offer in Compromise is a tool inside the Fresh Start Program. Understanding the difference—and the strict eligibility rules—is the key to successfully resolving your tax debt without falling for "tax relief" scams.
1. The Umbrella vs. The Tool
Think of the IRS Fresh Start Program as an umbrella. It is a set of policy changes the IRS made to be more flexible with taxpayers. Underneath that umbrella are several different "tools" you can use to fix your tax problem:
- Installment Agreements (Monthly payment plans)
- Penalty Abatement (Removing extra fees)
- Offer in Compromise (The actual debt settlement)
When someone says they "applied for the Fresh Start Program," they usually mean they applied for one of these specific options.
2. What is an Offer in Compromise (OIC)?
An Offer in Compromise is the most sought-after part of the Fresh Start initiative because it allows you to settle your tax debt for less than you actually owe.
However, the IRS does not grant these easily. They use a formula called Reasonable Collection Potential (RCP). They look at:
- Your Assets: Savings, home equity, and vehicles.
- Your Future Income: What you are expected to earn over the next several years.
If the IRS believes they can collect the full amount from you over time, they will likely reject your Offer in Compromise and suggest a payment plan instead.
3. Comparing Your Options
| Feature |
Fresh Start Payment Plan |
Offer in Compromise (OIC) |
| Goal |
Pay the full debt over time. |
Settle the debt for a fraction of the cost. |
| Form Used |
IRS Form 9465 |
IRS Form 656 & 433-A (OIC) |
| Paperwork |
Minimal (for under $50k). |
Extensive (bank statements, bills, paystubs). |
| Approval Rate |
Very High. |
Low (approx. 30-40% annually). |
| Impact |
Stops levies and garnishments. |
Wipes out the remaining tax debt entirely. |
4. Which One is Right for You?
Choosing between a standard payment plan and a settlement depends entirely on your financial "math."
- Choose the Fresh Start Installment Plan if: You have a steady income and can afford to pay off your debt over 6 years (72 months), but you just need the IRS to stop threatening your bank account.
- Choose the Offer in Compromise if: You have very little equity in your home, your monthly expenses take up almost your entire paycheck, and there is no realistic way you could ever pay the full balance before the IRS collection statute expires.
5. Don't Get Fooled by "Gimmicks"
Many companies use the term "Fresh Start Program" to sound like a magic "get out of jail free" card. In reality, the IRS is very transparent about who qualifies.
Before you spend thousands of dollars on a "settlement" fee, it is vital to have a Tax Professional perform a "Pre-Qualification Analysis" to see if your income and assets actually meet the IRS OIC criteria.
How We Can Help
Navigating the IRS Fresh Start Program shouldn't feel like a guessing game. Our team specializes in analyzing your financial data to determine which "tool" under the Fresh Start umbrella will save you the most money while keeping the IRS away from your paycheck.
