Can the IRS Fresh Start Program Help Me?
Hello this is Ben Smith with Etrends Group, your Prosperity Advisor. Today I just want to talk a little bit about the IRS Fresh Start Program. What it is, maybe a little bit of its history and how you might take advantage of it. So if you’ve heard about the IRS Fresh Start Program, you’ve probably heard of it on late night TV or maybe on a radio program or something like that. Usually accompanied with kind of scary music and the people pushing it have been trying to scare you a little bit about the IRS and promising you that if you call their 1-800 number they can get you big tax savings. That is often true. Those kinds of scare tactics, they’re obviously emotional and just not very ethical I don’t think. They often paint the IRS as your enemy and while the IRS is not your friend, in most cases the IRS is also not your enemy. As evidence by the IRS Fresh Start Program which is a program created by the IRS to help tax payers who have serious tax liabilities and who struggle to pay them or maybe can’t pay them. It’s a program to help those people get out from underneath that debt and get a fresh start. So lets talk a little bit about it. The Fresh Start Program is not necessarily new. It’s a rebranding of an old thing. The offer and compromise has been around for a long, long time and that’s all the Fresh Start Program is, it’s the opportunity for a tax payer to give the IRS an offer to say hey you know I have a $100,000 tax debt, I offer to pay you $5,000 if you’ll forgive the $95,000. That’s obviously a pretty extreme example, but I’ve seen it. That’s what it is, it’s an opportunity to make an offer that you can actually pay in exchange for relieving the rest of the debt and of course making the payments so the IRS actually gets something and doesn’t chase after you for eternity for it.
You know lets just start with the radio ad. The big tax houses or the “offer and compromise” firms that specialize in this. How you specialize kind of loosely here. I would not advise any of my clients to go with them. Not only can I help them with that, but these firms that advertise on the radio and they push that and that’s all they do, there’s a few things:
- The people that work with you at those firms are generally not going to be CPA’s, they’re not going to be professional accountants or tax preparers, they’re essentially just call center employees who follow checklists. That’s fine. There’s nothing wrong with their checklists, but their service is not going to be very personalized or individual to you. It won’t always account for all of your unique circumstances that you bring to the table.
- They’re not always very responsive. I have many clients who have come in here from those programs, from those service providers, a year, two years or three years after they first contacted them and they come in complaining how nothings been done. How they haven’t heard from them in 6 months. How they took their money and they don’t know what’s going on and I’ve also heard of people that have had success with the programs from these service providers, but generally speaking if you’re calling that 800 number, you’re talking to someone who doesn’t know you from Adam. They don’t have a personal relationship with you. They’re not really very accountable to you and of course once they have your money, well it’s not like you can show up at an office or something and actually hold that person accountable. So I really wouldn’t recommend that people use those services. Go see your accountant. Come see me. Build a relationship of trust. Hold me accountable and see that I’ll stick with you through the end and you have a face to talk to.
So the offer and compromise. Who can benefit? If you have a high tax liability and you can’t pay it. Moneys tight every single month, you cannot make the payment and maybe the liability is just growing with penalties and interest or from year to year it has occurred more tax liability and you can’t get those liabilities paid down, you’re very likely a good candidate for the offer and compromise. I’ve done many of them. I’ll highlight two examples. One I had a client who came to me, this was an older couple, who got caught up (this was a number of years ago) in the real estate frenzy of 2005-2006. They invested a lot of money with essentially a ponzi scheme real estate investor and they actually made really good money for a few years when they were investing in real estate in those big years. Because of that money they made in those years, they incurred very large tax liabilities. If I remember right it was like $75,000 which between 3 years of tax liabilities, and then of course the economy crashed and they lost all their money with the ponzi scheme. They were at the end of their careers entering retirement and they essentially were left with nothing. They essentially lived on social security and had nothing and yet they had this $75,000 tax liability which turned into $100,000 plus after penalties and interest. This is the perfect example of somebody who can benefit from the IRS Fresh Start Program. The IRS knows that this person, there’s no way that they can pay that liability within the 10 year collection frame that the IRS has to collect the money and so the IRS is willing to settle. In their case they actually paid nothing to the IRS and had their entire tax debt waived of the 100 and something thousand dollars. So if you’re in that kind of situation, this is a huge benefit. Another example quickly, this is a person who is in mid career. They are an entrepreneur. They started a number of different businesses and had a number of different businesses fail, a few kind of succeed, and for whatever reason this tax payer just didn’t get their taxes paid and they have like 6 years of back taxes. Maybe $10,000 per year and so they just kind of were essentially accumulating liability and in the most recent years, in the years they came to me, they were starting another business and the business was struggling. Again this is a situation where current income is low, got a lot of back taxes, and they were able to get an IRS offer and compromise through and I think they ended up paying about $15,000 total, taking care of a liability of about $70,000 or $60,000. So a pretty good deal for them.
If you’re in that situation or if you feel like you might benefit from this program, come see me. Call me up and we can talk about it. We can certainly let you know if you qualify or what you might qualify for and you know what, if you don’t qualify for the Fresh Start Program, if we can’t get you an offer and compromise, there might be some other options we can discuss that could relieve you from some of the stress that you’re feeling. Hope that was helpful to you. Again if you need any help I’m always here to help. Have a great day!