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0:14
pursuant to Internal Revenue Service guidance be advised that any federal tax advice contained in this program is not intended to be used and cannot be used
by any person or entity for the purpose of avoiding any tax penalties that may be imposed by the Internal Revenue Service or any other US Federal taxing
0:29authority or agency or promoting marketing or recommending to another party any transaction or 3matter addressed in the show
the opinions expressed by the host and the guests are their own and may not be 8used as authoritative advice any use of this material without the written consent of the host is strictly
prohibited
0:44 – Steve
I am your host Attorney Steven Leahy and this is the IRS Radio Hour On AM 560 The Answer
0:52- Jim
Well Steve this is the section of the show where you go to your blog – Tell me, what is on the blog this week.
1:01 – Steve
Well this week on the blog I wrote about the IRS Fresh Start Initiative. You’ll see it. Anybody who has IRS problems, if you go online you’ll see this all over the place for you know IRS Fresh Start initiative take advantage of this new program. It’s a fairly new program. It started in 2011 where they changed some of the rules and they made some of these things a little bit easier to take advantage of. So one of the first things they did, some other programs, so for instance we talk on this show a lot about – There’s the six things you can do if you owe the IRS money. And the first thing you can do is – you can pay them. You write them a check, Be done with them or borrow money from someone
1:41 – Jim
Oh – a check I have a check
1:42 Steve:
It has to be a good check
1:45 Jim:
I can’t help you then.
1:46 Steve:
Borrow money from someone but get the IRS get ’em out of your life. A second thing you do is an installment agreement and the third thing you can do is in offer in compromise and the fourth thing you can do is currently not collectible status the fifth thing you can do is bankruptcy and the sixth thing you can do, and this what a lot of people do before they come see me – is you continue to do nothing
2:09 Jim:
There is a seventh thing,
2:10 Steve
What’s that?
2:11 Jim
You can leave the country. Oh that’s right they can catch you now. Forget that.
2:17 Steve:
All those things we talked about installment agreements of an offer in compromise and also the currently not collectible they have changed some of the rules. Three things actually up four areas that are their own were changed one was the offer in compromise they changed some of the parameters. Same thing with installment agreement, they changed some of the parameters. We are going to get into that in just a second. Another thing they did is they changed the way they are getting rid of the tax lien if you have a tax lien against you. They changed some other rules and that. Another thing they did is they changed some other penalties. So in 2011 when they changed this if you old if he had some penalties from 2010 if I didn’t pay because of late payment I didn’t have the money to pay ’em they forgave some other late filing late payment penalties not late filing ever filed late they still they still got me with the penalty but if I failed to pay they waved that penalty for a year.
Obviously that’s a long time what does not help us today. But the things that they did change, so for instance, some weeks ago we talked about the installment agreement and different types of installment agreements. One type on installment agreement, what they call a streamlined installment agreement. And the streamlined installment agreement makes it easier. It streamlines the process the IRS will agree to.
So, generally, if I owe the IRS money, they’re going to ask me to provide all this information. I have to give them, they will ask for my tax returns, but they have my tax returns, but I have to provide them anyway. And I have to provide my pay stubs, and I have to provide my bank statement and I have to have a full disclosure of all my assets and all my liabilities. And it takes a long time and it’s very lengthy and its fairly hard process. But the streamlined process cuts through all that. They just say if I owed less, It used to be they would say if I owed less than $25,000 they would just set up a payment plan and the payment plan would be up to 60 months.
Okay so now what did the Fresh Start initiative what they did and installment agreement streamlined is that they raised it from $25,000 to $50,000. So now if I owe $50,000 dollars or less I can get the streamlined program and again it makes it a lot easier. It was $25,000t and now its $50,000 and the set.
Okay so now the next thing is the offer in compromise. The offer is really the big thing that changed the most. Because offers were always only like 20 percent or 18 percent were granted. So a lot of people would go through this the process – because it is a hard process. That one in an offer in compromise you do have to give them all this financial information. And they go through all your financial information, and then they determine. They have this calculation that they use. So there’s three big three big determinations of what how much they will accept.
One is what is my disposable income every month? So they look at my income and they subtract from that some expenses now the IRS were notoriously stingy. They didn’t give me a lot expenses. So for instance, if I have student loans, they didn’t permit me to deduct the student loans to determine how much they would accept.
5:41 – Jim:
But they force you to pay them?
5:42 – Steve:
Yes, I still have to pay them. But, they wouldn’t accept, So if they’re trying to calculate how much a lump sum. Because, remember an offer in compromise is when the IRS agrees to take a lump-sum payment to settle my IRS debt. Okay so if they’re if they’re not going to use all my expenses, well my disposal income number is going to be very large then. So, when they, the next thing is a multiplier. Okay, so the multiplier if I could pay them, if I could pay the IRS within, under 5 months, the multiplier used to be 48. So 48 months. So if I say for instance, I had I had $500.00 a month in disposable income. Well, they would multiply that by 48. And then they would – So that is $24,000 that they would accept, plus my assets.
Well, now the multiplier has been changed to 12. So now it’s only a one-year. So that’s a huge difference. Right now it’s only $6,000.00. A fraction of what they used to agree to. If I can pay between 6 months and 24 months, well now the multiplier is 24. And it used to be 60. So that should make a huge difference, a huge difference.
7:00 – Jim:
When they want to money in less time?
7:02 – Steve:
No. It’s the same, that’s the same amount of time that they would have done it before. It just now the number the multiplier is changed.
7:10 – Jim:
Lower?
7:11 – Steve:
Much lower. That’s right. And again, if they are agreeing to a lot more expenses, and so I can deduct a lot more expenses than I used to be able to deduct, then my monthly disposable income is less, and then the multiplier is less. Now that number’s going to be something that might be able to really actually take advantage of. And use it to get rid of my debt.
Now the third, the third aspect that were that we’re talking about is your assets. How many assets do you have? So the IRS goes back, if I have any equity. If have, for instance. If I have an IRA, and that’s where a lot of people get caught. “Well, yeah I have an IRA” If I had a lot of money in my IRA, and it is more than I owe the IRS, Well guess what – they’re not going to agree to offer in compromise because they can always take your IRA and pay off your debt.
Now there are ways to protect your IRA to make sure that they can’t take it. So when the IRS has a lien against you one of the things is, they only have the rights that you have. So, if I have an IRA and I don’t have a right to access that money until I’m 65 or until I’m 70, Well then the IRS doesn’t have a right to access that money until I’m 65 or 70. So they can take it away from me. But if I can go to my IRA and I could take it out and pay a penalty.
8:32 – Jim:
But does that make them want to wait?
8:35 – Steve:
No. Remember there’s a statue of limitations
8:38 – Jim:
So once you start paying job
8:39 – Steve:
I’m in my 40s, if I’m 45 and I get to get money on time 65 the statue of limitations will have run and they will be able to take that money from me. So that is one way I can protect my IRA but most people don’t have that kind of IRA like that. Most people have an IRA that they can get at, but they have to pay a penalty if they get at it.
So the next thing they did, they changed the rules when it comes to liens. Because they understand that if you have a lien against you, it makes it very hard for you to conduct your business. You can’t really borrow any more money. It affects your credit score tremendously. So they’ve changed some of the rules that let you take off, to release the lien, and also take it off your credit report which they never used to do before. So it used to be that if I owed less than $5000.00 than the IRS wouldn’t put a lien against me. Now, if I owe less than $10,000.00 then generally the IRS won’t put a lien against me
9:33 – Jim:
Really
9:34 – Steve:
Another thing that they did is if I owe less than $25,000.00 and have made three payments on an installment agreement, and I’m going to pay them in full, and I make three payments an installment agreement, then if I apply they’ll probably release the lien again. And so I won’t have a lien. I could still all the IRS money and they’ll release my lien. That’s something they never would do before. So these changes I have been a huge benefit for people who all the IRS and you should take advantage of it. I use to tell people that the Offer in Compromise was actually a farce it didn’t really work it didn’t work for almost anybody. But now it does work now it is starting to help a lot of people and so if you
10:13 – Jim:
Did that just come, like say can you go back retroactively now to like 3 years before it was covered?
10:18 – Steve:
Yes, If I owed the taxes yes
10:21 – Jim:
I go back to 2007 redo my taxes these rules apply to
10:25 Steve:
These rules apply to any money I owe the IRS today no matter where it’s from. So, If you have IRS problems one of these programs might help you call me at 312 664 6649 and all remember ChicagoTaxTeam.com there’s lots of answers there.
10:44 Jim:
Okay. See you on the other side