THE OFFER IN COMPROMISE FRESH START PROGRAM
In 2011, the IRS announced its Fresh Start Program. This new policy allowed people that were struggling find exactly what it sounds like, a “fresh start”. Through the vehicle of the Offer in Compromise program, the IRS modified its terms to allow a greater number of taxpayers to benefit from it. This expansion enabled a larger group of financially distressed taxpayers to clear up their tax problems at a much faster pace.
What is an Offer in Compromise?
The Fresh Start program implemented by the IRS is focused on the Doubt to Collectability offer in compromise. This type of compromise is focused on two things: disposable income and available equity in assets. If you can prove to the IRS that you do not have the ability to pay off the liability before it expires, then you qualify for relief. Tax debt expires 10 years from the last date of assessment, so being conservative, we could say 120 months remain on the debt. 120 months of paying your disposable income, with the help of any equity value as a down-payment, could the debt be paid off? If not, then you qualify.
I qualify, but for how much of a settlement?
DISPOSABLE MONTHLY INCOME (MULTIPLIER) + AVAILABLE EQUITY IN ASSETS = OFFER SETTLEMENT AMOUNT.
This equation might seem daunting. It is again saying if you paid your monthly disposable income for 120 months, and added the value of any equity in assets, that would be your settlement amount. For example, for someone that qualifies, if they have $50 disposable income, 120 months, and no equity, would be a settlement of $6,000.
Next Steps?
First Step is Collection Protection. In order to gain compliance, prep paperwork, and submit everything to the IRS, you’ll need some time. To make sure you are not in harm’s way, working on a collection prevention plan while prepping an offer is vital.
Second Step is Compliance. Taxpayers must be compliant with tax returns for the last six years. Also, if applicable, the taxpayer must be compliant with estimated tax deposit requirements.
Third Step is Resolution. This is the actual application step. First there is completing the paperwork, gathering and reviewing the substantiation, and submitting the package to the IRS. Once that is done, monitoring begins where there can be compliance issues, examination problems, or identity theft concerns. Lastly the negotiation phase where it is assigned to an IRS examiner to review.
There are many questions that arise when discussing the Fresh Start Program, and trust me, we hear a lot of them. Why would the IRS do this? Why do I need to hire a professional? How long does it take? I tried before but failed, why would I look into trying again? The IRS’ website calculator says I don’t qualify, should I trust it? We hope to answer many of these questions in related articles and videos to come.
So there is only one question truly left to ask, Do you qualify? Some companies will charge you to see if you qualify, other companies will tell you that you qualify without actually gathering enough information to do the two part test. Contact us at Tax Debt Services at 800-822-4122 and we can determine if you qualify through our free consultation. Or you can go online and complete our Do I qualify form at https://taxdebtservices.com/doiqualify/.