What is the Fresh Start Initiative?
In 2008, the first year of the Great Recession, our entire economy was collapsing! Businesses were laying off workers and homes were being foreclosed upon in numbers not seen since the Great Depression! At the federal government, there was a call for all hands-on deck to address this emergency! People were unable to timely pay their taxes due to unemployment, home foreclosure, and financial hardship. The IRS contribution toward addressing this crisis was the Fresh Start Program. In 2012 the IRS retooled this tax relief program to make it easier for taxpayers to obtain tax relief. This retooled federal tax relief program was rebranded as the Fresh Start Initiative.
What exactly is the Fresh Start Initiative, and what does it do? The Fresh Start Initiative is designed to help taxpayers unable to pay their back taxes due to financial hardship. The Fresh Start Initiative is a group of separate IRS programs, consisting of the following:
- Offer in Compromise (OIC)
- Economic Hardship Partial Payment Plan
- Currently Non-Collectable (CNC) Status
- Installment Agreement
Which of these Fresh Start Initiative Programs do you qualify for? Which of these Fresh Start Initiative Programs work best for you?
It boils down to your total monthly income verses your total IRS allowable monthly expenses. The basic individual work sheet or Financial Statement used to list these is the IRS Form 433-f. The IRS Form 433-f can be downloaded via the internet. However, it is not the only one – the IRS Form 433-a is more detailed, as is the 433-b for businesses. Do your total IRS allowable monthly expenses equal or exceed your total monthly income? If so, do you NOT own any real property or assets or do you own any real property that has no equity? If this is the case, then you might qualify for an Offer in Compromise, Economic Hardship Partial Payment Plan or Currently Non-collectable (CNC) Status.
Under the Offer in Compromise program, the taxpayer offers a lump sum in settlement of the tax debt. The offer amount is less than the total tax owed. The offer amount is based on detailed financial forms submitted to the IRS. By collection statute, the IRS has approximately ten years to collect the back tax owed (the CSED Date). Under an Installment Agreement, you make monthly payments to pay off your tax within extended timeframe. What if you cannot afford the monthly payments necessary to pay off your back taxes in full within ten years or within CSED? Under the Economic Hardship Partial Payment Plan, you only make a monthly payment that you can afford. Therefore, when approved for a Partial Payment Plan, your monthly payments may not pay the full amount of your total tax within CSED. After the CSED date has passed any remaining tax may be written off and reduce to zero. This is why in industry jargon the Economic Hardship Partial Payment Plan is called a back door OIC. Just as with the OIC, for an Economic Hardship Partial Payment Plan you must submit detailed financial forms. Does your financial Statement and supporting documents show you are in hardship? E.g., are your IRS allowable monthly expenses equal to or greater than your monthly income? Do your supporting documents show zero available equity in your assets or inability to borrow against your assets? In other words, do you not have the ability to pay anything at all to the IRS? If this is the case, the IRS may agree to classify your case as Currently Non-Collectable (CNC) Status. As long as your case is in CNC Status, the IRS will not take any collection action against you. After the CSED date has passed, your tax balance may be written off and reduced to zero.
However, even in this very basic example, nothing is simple when it comes to taxes. First, not all monthly living expenses are allowable by the IRS. Certain monthly living expenses, such as how much rent you can list, are capped by IRS National Standards. Monthly rent is based on the county you live in and the number of people in your household. The IRS National Standards are available via the internet. Get the picture? Unfortunately, resolving a tax problem is seldom easy. If you own real property and you have equity in your property, things become even more complicated. So, which Fresh Start Initiative Program is best for you? You can review IRS Form 433-f with an IRS Recognized Representative to get an idea.
IRS Recognized Representatives can represent taxpayers before the IRS. An IRS Recognized Representative is either an attorney, a Certified Public Accountant, or an Enrolled Agent. An Enrolled Agent is a person who has passed the IRS Special Enrollment Examination (SEE) and is privileged to represent taxpayers before the Internal Revenue Service.
Coast One Tax Group is a company knowledgeable in all Fresh Start Initiative Programs. We are a group of IRS Recognized Representatives – attorneys, accountants and Enrolled Agents. My colleagues and I work hard to obtain the best tax resolution (settlement) possible for our Clients! Regarding OICs we submitted, last year (2020), on average, we saved our clients a minimum of 93.2% of the amount of back taxes owed, and we have substantiated claims to prove it! Unfortunately, we cannot win them all. We cannot guarantee, for example, that ultimately the IRS will grant your specific Offer in Compromise. However, we will never submit an OIC unless it is a strong case. If you do not have a strong OIC case, we will tell you. And, we will find the best Fresh Start Initiative Program that you do qualify for!
How can Coast One Tax Group help you today? Need a second opinion? Give us a call, or drop us a text or an email!