﻿A healthy minority of people who reach out to us at Choice Tax Relief
bring up the IRS Fresh Start Program, they often lead with, “Hey, can you guys get me into the
Fresh Start Program?” And that question doesn’t really make sense, and by the time you finish this
video I hope you’ll understand why. But I can understand where that question is coming from.
They’re probably asking that question because they saw or heard an ad somewhere in which some
tax relief company was talking up the Fresh Start Initiative at the IRS and how it's still going on
and how you have to act fast before it goes away forever in an attempt to create, in my opinion,
a false sense of urgency. But in reality, the IRS Fresh Start Program isn't something that can
go away; it’s not a “program” you can get into; it was simply a set of changes the IRS
to things like notice of federal tax lien filing thresholds and offer in compromise
submission procedures that the IRS announced in three news releases in 2011 and 2012.
And as I will show you later in this article, the IRS used the phrase "fresh start" in these news
releases; they say things like, "The IRS is making changes to such-and-such policy in order to help
struggling taxpayers make a fresh start." That's it; that's all the IRS Fresh Start Program is;
it's not some special program that wipes away everybody's tax debt; it's simply the phrase
the IRS used to describe eight taxpayer-friendly changes it made over 10 years ago to some of its
policies, procedures, and programs having to do with tax relief and collections. But of course,
that phrase the IRS used in these news releases -- "fresh start" -- was quite
catchy. And so around that time we saw a lot of marketing departments at tax relief companies
start using this IRS "fresh start" language in their marketing and advertisements. And in my
opinion, a lot of them in their advertisements took the phrase "fresh start" and made it out
to sound like something more than it was in order to convince folks to sign up with them.
These companies made it sound like, "Sign up with us, and all your tax debt will be wiped away
in the baptismal waters of the IRS Fresh Start Program." In reality, the IRS Fresh Start Program
simply made a few changes to some things -- and I'm going to go over what they are in this video--
but just for sake of example, it raised the threshold of debt for when the IRS will file a
tax lien from $5,000 in unpaid taxes, penalties, and interest to $10,000. And, yes, it also did
make it a bit easier for some folks to qualify for an offer in compromise. But it's not this sweeping
tax debt forgiveness program that some have made it out to be. So in this video I'm going to set
the record straight about the IRS Fresh Start Initiative and tell you exactly what the IRS Fresh
Start Program actually did for taxpayers who owe. But first, a little about me. I’m Logan Allec,
I have been a CPA for almost 12 years now, and my company, Choice Tax Relief, helps taxpayers
resolve their tax issues with the IRS and/or their state. If you’d like to book a free consultation
with a qualified tax professional, you can call my company, Choice Tax Relief, at 866-8000-TAX,
that’s 866-8000-829, or you can fill out the quick form at choicetaxrelief.com, all that information
is in the description below. So like I said, the IRS Fresh Start Program is a series of changes the
IRS made in 2011 and 2012 to its practices, policies, and programs when it comes to tax
collections and relief. And for the rest of this video, I’m going to tell you what they are. Fresh
Start Change #1. Increased Notice of Federal Tax Lien Filing Threshold From $5,000 to $10,000 On
February 24, 2011, the IRS issued a news release -- News Release 2011-20 -- that was titled,
"IRS Announces New Effort to Help Struggling Taxpayers Get a Fresh Start; Major Changes
Made to Lien Process". So from the get-go, the initial focus of the Fresh Start Program
was really not so much making it easier for folks to get forgiveness but simply making it so
more people avoided getting a notice of federal tax lien filed against them in state or county
records. And basically what a tax lien notice is is a notice to the general public filed in state
and/or county records that such-and-such person -- in this case fashion personality Vanessa Williams
-- owes the United States government a certain amount of money -- in this case by way of example
$369,249.89. So, for example, let's say a taxpayer wants to refinance their home with a new lender.
But there's a notice of federal tax lien filed against them. This would make it very unlikely
unless the lien is subordinated or otherwise addressed, which is something we do for clients,
that a lender would want to do the refi because if the borrower defaults,
the IRS's position would take priority over theirs and there may not be enough left over
on the sale of the house to make the lender whole. Truth is, in general, lenders and other
kinds of creditors generally do not want to be in competition with the United States when it comes
to your property. So previously, before the Fresh Start Initiative, the IRS would file a notice of
federal tax lien on folks who owed them at least $5,000 in combined taxes, penalties, and interest,
but the Fresh Start Initiative increased that threshold amount to $10,000, where it is today.
Fresh Start Change #2: Eased Requirements to Obtain a Lien Withdrawal For a Released
Lien. So today, when the IRS files a notice of federal tax lien, that does not go on your credit
report. The credit bureaus changed their policies on this back in April 2018. But before this,
notices of federal tax liens would show up on credit reports, which could obviously adversely
affect the individual's ability to obtain credit. This had other consequences as well. For example,
many state licensing boards will not grant a license to somebody if they have a notice of
federal tax lien filed against them. So let's say that an individual paid off their debt to the IRS
indicated on the notice of federal tax lien. Before the Fresh Start program, what would happen?
The IRS would release the lien no later than 30 days after the taxpayer paid their liability.
And this means that the lien no longer has any power or effect because the debt has been
paid. But before April 2018, released tax liens still appeared on individuals' credit reports.
The way to get them off one's credit report was to have the notice of federal tax lien withdrawn,
which would completely eliminate the lien from the individual's credit report as though it had
never been filed in the first place. And prior to the Fresh Start Program, the IRS would not
necessarily withdraw a lien simply because it had been released. But the Fresh Start Program
changed that by making it so that a taxpayer who satisfied three conditions could get their lien
withdrawn. Condition #1: The tax liability stated on the lien has been satisfied. Condition #2:
The taxpayer is in filing compliance for at least the past three tax years, including all individual
returns, business returns, and information returns. And Condition #3: The taxpayer is current
on their estimated tax payments and federal tax deposits. So thanks to the Fresh Start Program,
if a taxpayer meets these criteria, they can prepare Form 12277,
complete the informational questions in Sections 1-9, check the "Released" box in Section 10,
check the fourth box in Section 11, explain their situation in Section 12, and they would
sign the form and mail it to the IRS, and the IRS will withdraw their lien. Fresh Start Change #3:
Eased Requirements to Obtain a Lien Withdrawal With a Direct Debit Installment Agreement.
The Fresh Start Program also made it so that compliant taxpayers who owe $25,000 or less
and who have never defaulted on an installment agreement with the IRS previously can enter into
a full-pay Direct Debit Installment Agreement with the IRS and have their notice of federal tax lien
withdrawn once they make three consecutive direct debit payments under that installment agreement.
They would use that same Form 12277 except this time they would indicate in Section 10 that the
lien is still "Open" and in Section 11 they would check the two installment agreement boxes in
Section 11. Fresh Start Change #4: Expanded Eligibility for Streamlined Small Business
Installment Agreements. Prior to the Fresh Start Program, small businesses who owed less than
$10,000 to the IRS were eligible to participate in a streamlined Direct Debit installment agreement
program with the IRS; the Fresh Start Program increased that amount to $25,000.
Fresh Start Change #5: Expanded Eligibility for Streamlined Offers in Compromise. An offer in
compromise is an agreement between the IRS and a taxpayer to settle the taxpayer's tax debt
for less than they owe. And as I discussed in my video on offer in compromise basics – link
at the top of the description as well as in the description below – there is a streamlined
offer in compromise program that the IRS has for certain taxpayers. Just for clarification,
this streamlined program does not make it easier to get approved for an offer in compromise; it
simply makes the process easier. For example, with a streamlined offer in compromise, IRS employees
will typically simply take additional information they need over the phone rather than through paper
mail as is typical with a non-streamlined offer in compromise. And prior to the Fresh Start Program,
taxpayers had to have a tax liability of $25,000 or less to participate in the streamlined offer
in compromise program; the Fresh Start Program increased that amount to $50,000. The Fresh Start
Program also allowed taxpayers with annual incomes up to $100,000 to participate in the streamlined
offer in compromise program. If you would like more information about the IRS offer in compromise
program, you can book a free consultation with a tax professional by calling my company,
Choice Tax Relief, at 866-8000-TAX, that’s 866-8000-829, or you can fill out the quick form
at choicetaxrelief.com, all that information is in the description below. Fresh Start Change #6:
Extension of Time to Pay 2011 Taxes. On March 7, 2012, the IRS issued its second
Fresh Start news release -- News Release 2012-31 -- that opened with, "The Internal
Revenue Service today announced a major expansion of its 'Fresh Start' initiative to help struggling
taxpayers by taking steps to provide new penalty relief to the unemployed and making Installment
Agreements available to more people." So what did this second round of Fresh Start
do for taxpayers? Well, the first thing this second round did was institute a temporary
penalty relief on the failure-to-pay penalty but only for tax year 2011. So in a typical tax year,
you can file for a six-month extension of time to file your tax return if you can't or don't want
to file it before the original deadline, which for most individual filers is April 15 or if April 15
is on an applicable holiday or weekend, the next business day after April 15. So if you don't want
to or can't finish your tax return by April 15, you can get an extension on filing your tax return
for free until October 15 by filing Form 4868, and of course you can also file an extension for
free online. Every year on this channel, I make a video showing people how to file an extension.
However, this extension is only an extension on the time you have to file your tax return and not
be assessed the failure-to-file penalty, which accrues at 5% per month up to five months. This
extension does not extend the time you have to pay your taxes due; those taxes are due by April 15,
the original due date of your return; if you do not pay your taxes or a portion of your taxes
by April 15, a failure-to-pay penalty will accrue at rate of 0.5% per month up to 25%.
But back in 2011, with the economy still recovering from the Great Recession of 2007-2009,
the government decided to give certain people a break and not only allow them to extend the
time they have to file their tax return but also the time they have to pay their taxes.
So under this second round of Fresh Start, the IRS said, "If you were unemployed for at least 30 days
between January 1, 2011, and April 17, 2012, or if you were self-employed and experienced a 25%
or greater reduction in business income in 2011 due to the economy, and if you make $100,000 or
less or $200,000 or less if you're married filing jointly and you owe $50,000 or less in taxes for
tax year 2011, you can file Form 1127A and get a six-month extension of time to pay your taxes
as long as you pay them in full by the extended deadline of October 15, 2012." But that was only
for tax year 2011; it does not apply today; yes, there is still a mechanism and a form -- Form
1127 -- to request an extension of time to pay, but it's not as easy to get as the 2011 provisions
which applied to a lot of people given what the economy was at the time. Fresh Start Change #7:
Expanded Eligibility for Streamlined Installment Agreements. If you've seen my video on installment
agreements – link at the top of the screen as well as in the description below – you know that if you
owe $50,000 or less to the IRS in combined taxes, penalties, and interest, you can apply online for
a payment plan online for up to 72 months. This is a streamlined installment agreement, and it's
streamlined because you can set it up online without having to submit to the IRS a Collection
Information Statement, Form 433-A or Form 433-F, that basically documents all your financial
information according to IRS standards. So now you can set up a streamlined installment agreement
if you owe $50,000 or less; that is thanks to this second round of the Fresh Start Program.
Previously, before Fresh Start, you could only $25,000 or less to the IRS in order to be eligible
for a streamlined installment agreement, and they only went up to 60 months. And finally, Fresh
Start Change #8: Taxpayer-Beneficial Changes to Offer in Compromise Calculations. On May 21, 2012,
came IRS News Release IR-2012-53, which announced the third and final Fresh Start initiative. And
this one was to make the offer in compromise program a lot more accessible to more people
by changing some of the calculations. So if you've seen my video on how to calculate your own offer
in compromise amount – link at the top of the screen as well as in the description below – you
know the general formula is to calculate your reasonable collection potential, which is a
combination of your equity in assets component and your income component. And your income component
is based on your net monthly excess income as determined by IRS formulas multiplied by either
12 or 24 months -- 12 months if you can pay your offer amount within five months and 24 months if
you can pay your offer amount within 24 months. Well, before the Fresh Start Program, if you
could pay your offer amount within five months, you multiplied your net monthly excess income
by 48 months; and if you could pay your offer amount within 24 months, you multiplied your
net monthly excess income by 60 months. So due to the changes in this math, the Fresh Start Program
did make more people eligible for an offer in compromise -- at least the doubt as to
collectibility offer in compromise, which is the most common one submitted to and accepted by the
IRS -- and it did reduce the offer in compromise amounts that many people had to submit and pay.
So, folks, that is what the Fresh Start Program is, and don’t let anybody tell you otherwise.
Don’t let anybody tell you the IRS Fresh Start Program is some special program that you can get
into that will wipe away all your tax debt; it is certainly possible to settle your tax
debt for less than you owe through the offer in compromise, and the Fresh Start Program
certainly did make it easier to qualify for an offer in compromise, but the offer in compromise
program was around well before the Fresh Start Program. If you’d like to learn more
about tax relief in general, a high-level overview, be sure to check out this video
right here, and if you’d like to see a playlist containing all of my tax relief videos,
click right here, and if you’d like to visit my tax relief company’s website to book a free
consultation, click right down here, and I will see you in the next video, buh-bye.