How Do I Apply for the IRS Fresh Start Program?

To apply for the IRS Fresh Start Program, first decide which of its options fits your situation — an installment agreement, an Offer in Compromise, Currently Not Collectible status, first-time penalty abatement, or a tax lien withdrawal — then file the specific form for that option after confirming you’re current on all required tax returns. Fresh Start isn’t a single application. It’s an umbrella name for several IRS resolution tools with relaxed thresholds, and each one has its own form, fee, and process.

Get Current Before You Apply

The IRS won’t consider any Fresh Start request until two conditions are met. Every prior-year return you were required to file has to be filed. And if you have income that isn’t subject to withholding — self-employment income, for example — your estimated tax payments for the current year need to be up to date.

If you have unfiled returns, that’s step one before any resolution paperwork. The IRS also won’t enter a new settlement or payment agreement with anyone in an active bankruptcy case, because the automatic stay blocks both collection and separate deals with individual creditors.

Pick the Right Option for Your Situation

The option you apply for depends on how much you owe and how much you can realistically pay:

You can pay in full within 180 days: short-term payment plan, no setup fee.
You owe $50,000 or less and can pay within 72 months: streamlined installment agreement.
You owe more than $50,000 or need longer than 72 months: standard installment agreement with a financial disclosure.
Your balance is too large to pay off before the collection statute expires: partial payment installment agreement.
You genuinely can’t afford anything: Currently Not Collectible status.
Your finances mean the IRS realistically couldn’t collect the full amount: Offer in Compromise.
Your balance is largely penalties and you have a clean recent record: first-time penalty abatement.
You have a Notice of Federal Tax Lien filed and owe $25,000 or less: lien withdrawal with a direct debit agreement.

Businesses qualify for streamlined installment treatment at a lower threshold of $25,000 or less.

How to Apply for an Installment Agreement

An installment agreement is the most common Fresh Start option and the simplest to set up. You agree to monthly payments; the IRS agrees not to levy or garnish while you keep them up.

Streamlined Agreements: Apply Online

If you’re an individual who owes $50,000 or less in combined tax, penalties, and interest, the fastest route is the IRS Online Payment Agreement tool at IRS.gov/OPA.¹ You verify your identity, propose a monthly payment that pays the balance within 72 months (or before the collection statute expires, whichever comes first), and get a confirmation number on the spot. No financial statement is required — you don’t have to disclose your assets, bank balances, or expenses.

You can also file Form 9465, Installment Agreement Request, by mail, but the online route is cheaper and faster.²

Setup Fees

The one-time setup fee depends on how you apply and how you pay:

Direct debit, applied online: $22
Direct debit, applied by phone, mail, or in person: $107
Other payment methods (check, EFTPS, card), applied online: $69
Other payment methods, applied by phone, mail, or in person: $178

Short-term payment plans that pay in full within 180 days carry no setup fee regardless of how you apply.³ If you can clear the balance in six months, calling 800-829-1040 or using the online tool avoids the setup fee entirely.²

Balances Over $50,000 or Longer Than 72 Months

If you owe more than $50,000, or you can’t pay within 72 months, file Form 9465 along with Form 433-F, Collection Information Statement. Form 433-F asks for your income, expenses, and assets so the IRS can determine a reasonable monthly payment.³ The IRS evaluates your expenses using its National and Local Standards — preset allowances for food, clothing, housing, transportation, and health care based on family size and location.⁴ Food and clothing allowances are granted in full; housing and transportation are capped at the lesser of what you actually spend or the local standard. If your rent is $800 and the local standard allows $1,400, you get credit for $800.

Partial Payment Installment Agreements

If your balance is too large to pay off before the IRS’s 10-year collection window closes, a partial payment installment agreement (PPIA) may work.⁵ You make monthly payments you can afford until the Collection Statute Expiration Date arrives, and any remaining balance is no longer collectible. A PPIA requires a full financial disclosure, and the IRS will review your finances periodically to check whether your ability to pay has changed.

How to Apply for an Offer in Compromise

An Offer in Compromise (OIC) settles your entire tax debt for less than you owe. The IRS accepts an offer only if the amount you’re proposing represents the most it can reasonably expect to collect from you.⁶

Run the Pre-Qualifier First

Before filling out the paperwork, use the IRS Offer in Compromise Pre-Qualifier at irs.treasury.gov/oic_pre_qualifier.⁷ You enter your financial information and filing status, and it calculates a preliminary offer amount. It’s a guide, not a guarantee, but it tells you quickly whether the numbers are likely to work.

Gather Your Forms and Documents

An OIC application requires:

Form 656, Offer in Compromise
Form 433-A (OIC), Collection Information Statement for Wage Earners and Self-Employed Individuals
Form 433-B (OIC) if the offer includes business debts, plus a separate Form 656 for those debts⁸

All of these come bundled in the Form 656-B booklet on IRS.gov. Form 433-A (OIC) is where most of the work happens. You’ll document gross monthly income, mandatory deductions like taxes and health insurance, equity in real estate and vehicles, bank and investment balances, and monthly living expenses. The IRS compares your figures against third-party data and its own standards, so accuracy matters more than presentation. Before you start the form, gather at least three months of pay stubs, bank statements for every account, mortgage or lease agreements, utility bills, and vehicle titles with loan balances.

Choose a Payment Structure

With your application, you choose one of two payment options:

Lump sum: include 20% of your total offer with the application; if accepted, pay the balance in five or fewer payments.⁶
Periodic payment: include your first proposed monthly payment with the application and keep making monthly payments during the review. If accepted, continue monthly until paid in full.⁶

Periodic payments are applied to your offer, so they aren’t wasted if the IRS accepts.

Fee and Low-Income Waiver

The OIC application fee is $205 and is nonrefundable. It must be submitted with Form 656 along with your initial payment.⁶ If your income falls below certain thresholds, you qualify for low-income certification, which waives both the fee and the initial payment.⁹

Thresholds are based on your adjusted gross income from your most recent return or household gross monthly income multiplied by 12. In the 48 contiguous states, the cutoff is $37,650 for a single person and $78,000 for a family of four. Alaska and Hawaii have higher thresholds.¹⁰

Where to Send It

OIC packages are mailed to the IRS processing center for your geographic area. The correct address is printed in the Form 656-B booklet. Confirm your package includes Form 656, Form 433-A (OIC) with supporting documentation, the $205 fee (unless waived), and your initial payment. If paying by check, attach it to the front of the application to avoid processing delays. A missing fee or incomplete financial statement is the fastest way to get your package returned without review.

How to Apply for Currently Not Collectible Status

If paying anything would leave you unable to cover rent, food, or other basic living expenses, you can ask the IRS to place your account in Currently Not Collectible (CNC) status. CNC isn’t a settlement or a payment plan. It’s a temporary designation that pauses active collection.

To request CNC status, call the IRS or work with a revenue officer, and complete Form 433-A (for individuals) or Form 433-B (for businesses) to show that your allowable expenses equal or exceed your income. The IRS applies the same National and Local Standards used for other Fresh Start options to decide whether paying the debt would leave you unable to meet necessary living expenses.¹¹

CNC status doesn’t erase the debt. Interest and penalties continue to accrue, and the IRS reviews your finances periodically. But if the 10-year collection statute expires while you’re in CNC, the remaining balance becomes uncollectible.⁵

How to Apply for First-Time Penalty Abatement

If failure-to-file or failure-to-pay penalties are inflating your balance, ask about First Time Abate (FTA). This won’t reduce the underlying tax, but the penalty and its accrued interest can be a significant piece of what you owe.

You qualify if you have a clean compliance history for the three tax years before the penalty year: all required returns filed on time, and no penalties assessed (other than estimated tax penalties) during that period.¹² There’s no special form. Call the IRS to request it. If FTA doesn’t apply, you can still request penalty relief by demonstrating reasonable cause — a serious illness, a natural disaster, or reliance on incorrect advice from a tax professional.¹³

How to Apply for a Tax Lien Withdrawal

A Notice of Federal Tax Lien is a public filing that attaches to your property and appears on credit reports. If you owe $25,000 or less and are on a Direct Debit Installment Agreement (DDIA), you can request withdrawal by filing Form 12277, Application for Withdrawal of Filed Form 668(Y).¹⁴

The specific requirements:

Aggregate unpaid balance of $25,000 or less at the time of the request (you can pay it down to $25,000 first if you owe more)
Agreement fully pays the debt within 60 months or before the collection statute expires
At least three consecutive direct debit payments processed before applying
No default on this or any previous DDIA¹⁵

If you’re on a regular installment agreement, convert to direct debit first.

What Happens After You Submit

You’ll receive an acknowledgment letter with a case number. What follows depends on which option you filed.

Streamlined agreements set up online are usually approved immediately. Paper-filed and non-streamlined installment requests take longer because an IRS employee has to review Form 433-F and verify your finances. Collection is paused while your application is pending.

OIC review takes several months, and complex cases can stretch past a year. Collection stays suspended throughout. An examiner may send written requests for clarification — a bank deposit, an asset valuation, an income discrepancy. Respond by the deadline in the letter to keep your application alive. If the IRS hasn’t made a decision within 24 months of receiving your offer, the offer is automatically accepted by law.⁶ The clock starts when the centralized processing unit receives the package and doesn’t include any appeal period.

If You’re Rejected or Fall Behind

A rejected OIC comes with a letter giving you 30 days to request an appeal with the IRS Independent Office of Appeals.¹⁶ Collection stays suspended during the appeal.

A rejected installment agreement goes through the Collection Appeals Program. File Form 9423, Collection Appeals Request, with the collection office that sent the rejection — not directly to Appeals. If a revenue officer has been handling your case, call them first to explain your disagreement. A denied lien withdrawal follows the same Form 9423 path.

If you stop paying on an installment agreement, the IRS sends Notice CP523, which gives you 30 days to either catch up or contact the IRS before the agreement terminates. After termination and exhaustion of appeal rights, the IRS can levy bank accounts, garnish wages, and seize property including vehicles and real estate.¹⁷ The most common reasons agreements fall apart: an income drop that makes the monthly payment unaffordable, or failing to file or pay taxes for a new year while the agreement is active. If your finances change, contact the IRS before you miss a payment. Modifying an existing agreement is far easier than digging out of a default.

1
Internal Revenue Service. Online Payment Agreement Application
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Internal Revenue Service. Instructions for Form 9465
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Internal Revenue Service. Payment Plans; Installment Agreements
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Internal Revenue Service. Collection Financial Standards
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Office of the Law Revision Counsel. 26 U.S. Code 6502 – Collection After Assessment
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Internal Revenue Service. Offer in Compromise
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Internal Revenue Service. Offer in Compromise Pre-Qualifier
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Internal Revenue Service. About Form 656, Offer in Compromise
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Internal Revenue Service. Form 656 Offer in Compromise
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Internal Revenue Service. Form 656-B Offer in Compromise Booklet
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Internal Revenue Service. IRM 5.16.1 Currently Not Collectible
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Internal Revenue Service. Administrative Penalty Relief
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Internal Revenue Service. IRM Part 20 – 20.1.1 Introduction and Penalty Relief
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Internal Revenue Service. Understanding a Federal Tax Lien
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Internal Revenue Service. IRM 5.12.9 Withdrawal of Notice of Federal Tax Lien
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Internal Revenue Service. Preparing a Request for Appeals
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Internal Revenue Service. Notice CP523 – Notice of Intent to Levy